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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Stapleyside Company -v- Carraig Donn Retail Ltd [2015] IESC 60 (09 July 2015)
URL: http://www.bailii.org/ie/cases/IESC/2015/S60.html
Cite as: [2015] IESC 60
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Judgment
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THE SUPREME COURT [Appeal No: 61/2011] Clarke J. MacMenamin J. Laffoy J.
Stapleyside Company Plaintiff/Appellant and
Carraig Donn Retail Limited Defendant/Respondent Judgment of Mr. Justice Clarke delivered the 9th July, 2015. 1. Introduction 1.2 As a result of the service of a document, the precise legal status of which is in dispute, Carraig Donn claimed that the relevant lease had come to an end, but in circumstances where it was entitled to bring an application before the Circuit Court for the grant of a new lease under the provisions of the Landlord and Tenant (Amendment) Act 1980 (“the 1980 Act”). On the other hand, Stapleyside maintained initially that it was entitled to an order of specific performance requiring Carraig Donn to surrender the lease in question. However, by the time the case came to be heard before the High Court, Stapleyside had abandoned that claim and simply argued that the original lease continued in existence. 1.3 Carraig Donn succeeded in the High Court. On that basis, and without prejudice to the appeal brought by Stapleyside to this Court, the Circuit Court proceeded to fix the terms of a new lease under the provisions of the 1980 Act. 1.4 In substance, Carraig Donn asserts that the High Court ruling was correct. On that basis, it is said that the original lease was terminated, that its entitlement to a new lease under the provisions of the 1980 Act thereby arose, and that now it can properly be said to hold the relevant premises on foot of the new lease and at the rent fixed by the Circuit Court. 1.5 On the other hand, Stapleyside asserts that the High Court incorrectly concluded that the lease in question had been terminated. On that basis, it is argued that it follows that the original lease continues in effect. While it is, therefore, common case between the parties that Carraig Donn is entitled to continue to occupy the relevant premises, the lease under which that entitlement arises is the subject of dispute and, importantly, the rent payable both in respect of certain periods to date and also into the future is likewise disputed. If Carraig Donn is right, the rent payable is €230,000.00 per annum on the basis of the Circuit Court order, while if Stapleyside is correct, the rent payable is the sum of €309,500.00 payable as a result of the original lease and a review of rent which had already occurred prior to the events which gave rise to these proceedings. In substance, the issue between the parties turns principally on the proper interpretation of the arrangements entered into at the time when a reduced rent for the year 2009 was agreed. In order to understand precisely how that issue arises, it is necessary to turn to the facts. 2. The Facts 2.2 In early 2009, Carraig Donn encountered some financial difficulties and contacted Stapleyside with a view to negotiating a reduction in rent. The parties commenced negotiations. As part of those discussions, Stapleyside sent an email to Carraig Donn on 29th April, 2009, communicating an offer of “two options” for such a reduction. While there was no formal written acceptance of either of the proffered options, it is accepted by both of the parties that a letter dated 13th May, 2009, sent by Carraig Donn to Stapleyside’s parent company (“Clancourt”) enclosing a cheque for the sums due under the second option (“Option 2”) - being €207,365.00, or 67% of the full 2009 rent - can be taken as an acceptance of Option 2. The parties therefore accept that an agreement in terms of Option 2 was entered into as a result of the sums concerned being proffered and accepted on 13th May, 2009 (the “May Agreement’). 2.3 Option 2 is in the following terms:-
Pay Q3 and Q4 service charge quarterly in the normal way Clancourt have an option to take surrender of the Unit 25X lease subject to 90 days notice and refund of rent paid in advance Clancourt/Carraig Donn to negotiate new lease on alternative unit in event that Unit 25X lease surrendered Review position again at 31/12/2009 if option not exercised”. 2.5 On 10th November, 2009, Stapleyside served Carraig Donn by post with a notice, described as a notice of termination, in the following terms:
2.7 Conversely, Stapleyside contended that, on the basis of the May Agreement, and s.17(1)(a)(iii) of the 1980 Act, Carraig Donn has lost its right to a new tenancy. 2.8 As a result of the High Court decision, which, of course, upheld Carraig Donn’s position, an Order has now been made by the Circuit Court to grant a new lease under the 1980 Act with annual rent set at €230,000.00 2.9 I now turn to the High Court judgment. 3. The High Court Judgment 3.2 That being said, McGovern J. took the view (at para. 10 of his judgment) that “[t]he resolution of the dispute between the parties turns, to a significant extent, on an interpretation of the clause in the email of 29th April, 2009, [which contained Option 2 of the May Agreement] which states:
3.4 McGovern J. did not accept Stapleyside’s submission that by not “yielding up possession or surrendering the Lease, [Carraig Donn] has repudiated the agreement as set out in Option 2”, which, it was said, thereby entitled Stapleyside to recision. Ultimately, McGovern J. held that “having regard to the application of the contra proferentem rule and the use of the word ‘surrender’ in Option 2 when, what in fact happened was a demand for possession by the plaintiff on giving ninety days notice” there was no repudiatory breach of the May Agreement on the part of Carraig Donn. 3.5 McGovern J. was of the view that Stapleyside took a step which was outside the terms of the May Agreement because it did not “take surrender of the Unit . . .” but rather, served a notice of termination, which was accepted by Carraig Donn subject to its right to claim a new tenancy. On that basis, it was held that the Lease could no longer subsist. Accordingly, McGovern J. took the view that the claim by Carraig Donn for a new tenancy was a matter for the Circuit Court. 4. The Appeal
2. Damages, in addition to and/or in lieu of specific performance, pursuant to section 2 of the Chancery Amendment Act, 1858 or otherwise; Further or in the alternative and without prejudice to paragraphs 1. and 2.: 3. An Order for possession of the premises described in the Schedule hereto” 4.2 However, in the case as ultimately argued before the High Court, Stapleyside departed from its original claim. By Amended Statement of Claim dated 27th October, 2010, on foot of an Order of the High Court dated 18th October, 2010, permitting such amendment, Stapleyside, in electing to purport to accept what was said to be the repudiation of the May Agreement by Carraig Donn, and abandoning its claim for specific performance, sought recision of the May Agreement including, as a consequence, the payment of the balance of all monies which were due on the foot of the Lease without deduction. 4.3 On that basis, it was argued by Stapleyside that the position which it ultimately urged on the High Court was one entirely consistent with the situation argued for on appeal, being that, in all the circumstances of the case, the Lease continued to subsist. In substance, the argument made was that the proper interpretation of the relevant sentence from the May Agreement was that Stapleyside could give notice calling on Carraig Donn to surrender the Lease and could, as they in fact initially sought to do, bring proceedings to require Carraig Donn to surrender the Lease in the event that Carraig Donn did not comply with the requirement to surrender. On that basis, it was said that, Carraig Donn not having in fact surrendered the Lease and Stapleyside not having proceeded with its application for specific performance, the Lease continued in existence. 4.4 It was said that the notice of termination could not be effective to terminate the Lease because there was no legal entitlement on the part of Stapleyside, as landlord, to terminate the Lease in that manner. On that basis, it was said either that the notice in question was ineffective completely or was only effective to require Carraig Donn to surrender the Lease. It was said that it followed that, for the Lease to come to an end, a further step would have been required, being an actual surrender by Carraig Donn. As that step had not been taken by Carraig Donn, and had not been directed by the Court because of the abandonment by Stapleyside of its claim for specific performance, it was said that the service of the relevant notice had not in fact terminated the Lease at all. 4.5 Counsel for Carraig Donn, on the other hand, argued that the proper interpretation of the May Agreement was that it amounted in substance to the equivalent of an agreement which provided for a break clause in the Lease. As a consequence it was said that Stapleyside was entitled, in return for having agreed to accept the payment of a reduced rent, to serve a notice of termination. On that basis, it was argued that the effect of the service of the relevant notice was to terminate the Lease with effect from the 16th February, 2010. On that argument, it was said that the Lease has now been terminated and that a new lease has properly been granted by the Circuit Court under the provisions of the 1980 Act. 4.6 As is clear from that analysis, the central issue in dispute between the parties is as to the proper interpretation of the May Agreement. I will shortly turn to a discussion of that issue, but before so doing it is necessary to touch briefly on the potential impact of the 1980 Act on that question. 5. The 1980 Act 5.2 Section 17(1)(a)(iii) of the 1980 Act provides that:-
5.5 In those circumstances, there was some debate at the hearing before this Court as to whether a term in a lease between a landlord and a tenant, which provided that the landlord be entitled to require the tenant to surrender, might fall foul of section 85. 5.6 Counsel for Stapleyside accepted that there might be a strong argument that the inclusion of a simple and straightforward clause in a lease which allowed the landlord to serve a notice on the lessee requiring the lessee to surrender might well be void under section 85. However, counsel argued that the facts of this case were significantly different in that, it was said, the arrangement entered into in this case was that Carraig Donn, in return for obtaining a significant benefit to which it was not otherwise entitled (being the acceptance of a significantly reduced rent for one year) thus saving it a sum in excess of €100,000, agreed to surrender the Lease if called on to do so in accordance with the terms of the May Agreement. 5.7 However, those, and possibly other, Landlord and Tenant Act issues may well not arise depending on the view which is taken as to the proper interpretation of the May Agreement in the first place. If, properly interpreted, that agreement required an actual surrender by Carraig Donn (whether completely voluntarily or as a result of an order for specific performance of a court of competent jurisdiction) then the Lease clearly could not have terminated, and no question of the application of either s.17 or s.85 would arise. 5.8 If, on the other hand, the May Agreement is to be interpreted, as counsel for Carraig Donn suggested, as entitling Stapleyside to serve a notice which would have the effect of terminating the Lease, then, for somewhat different reasons, neither s.17 nor s.85 may have had any effect, for there would be no surrender and thus no arguable exclusion by contract of the right to a new tenancy. 5.9 It follows that the first and key question which the Court was required to address was as to which interpretation of the May Agreement was correct. I turn to that question. 6. Discussion 6.2 If I might digress, it is of some importance to emphasise that those engaged in commerce are often critical of what they might see as barriers placed in the way of doing sensible business by lawyers who are concerned with attempting to put arrangements agreed into a legally acceptable form. It must be accepted that there may be times when this can have the effect of slowing down the conduct of business. However, as this and many other cases amply demonstrate, the problem with arrangements not being adequately converted into a legally recognisable form is that significant problems can be encountered if things go wrong. In such circumstances, a court is required to do the best it can with the language used by the parties (the text) to be construed in the light of all of the circumstances in which the agreement was entered into (the context). But it is important to acknowledge that both text and context are relevant in the proper interpretation of commercial documents. 6.3 Those principles of interpretation (the “text in context” method) apply to no lesser extent in the field of property documentation. To ignore context is to ignore the well accepted fact that words used in agreements would be seen by any reasonable person having knowledge of the surrounding circumstances as being potentially affected as to their meaning by the context in which the agreement was entered into in the first place. But equally, the text must be given all appropriate weight, for it is in the terms of that text that the parties have settled on their arrangement. 6.4 In this case, the parties, for better or worse, used the term “surrender”. As the trial judge pointed out, a surrender is an act of a tenant or lessee in giving up their interest to the landlord. A landlord cannot, by a unilateral act, cause a surrender of a lease. However, the May Agreement contemplates that the landlord in this case can serve a 90 day notice which will give the landlord the option to “take a surrender”. The only workable meaning of the language used is that the intention of the parties was that the landlord (by serving the relevant notice) placed on the lessee an obligation to surrender at the end of 90 days. 6.5 In my view, therefore, the proper construction of the May Agreement is that Stapleyside was entitled to serve a notice which placed a legal obligation on Carraig Donn to surrender the Lease at the expiry of the 90 days. 6.6 In the context of that interpretation, how then should one characterise the notice served by Stapleyside? Two possibilities arise. First, it might be said that the notice is ineffective to achieve the end contemplated by the May Agreement because it purports to terminate the Lease rather than to call on Carraig Donn to surrender the Lease. Second, it is possible to say that, in the context of the May Agreement, the notice should be interpreted as invoking the entitlement of Stapleyside to require Carraig Donn to surrender. However, in my view, it is not necessary to choose between those two possible characterisations, for in either event the notice could not have brought the Lease to an end. It may be the case that the notice was entirely ineffective, in the terms of the May Agreement, because it purported to terminate when the only entitlement was to call on Carraig Donn to surrender. Alternatively, the notice may only have had the effect of creating a legal obligation on Carraig Donn, by virtue of the terms of the May Agreement, to surrender. Given that Carraig Donn did not, in fact, surrender and was not required by court order to surrender, the Lease would not, in that scenario, have come to an end either. 6.7 It only remains to consider whether, as the trial judge clearly felt, the notice, having been accepted by Carraig Donn, could give rise to a termination of the Lease altogether outside of the scope of the May Agreement. I am not persuaded that the notice could be said to have had that legal effect even if accepted by Carraig Donn. Stapleyside had no right to terminate the Lease by the simple service of a notice. Such a right did not exist under the terms of the Lease itself. Such a right did not arise under the May Agreement as properly construed. The service of such a notice could not, therefore, be legally effective to bring the Lease to an end. If it had any potential legal consequence it was only to require Carraig Donn to surrender. As Carraig Donn did not surrender and as Stapleyside abandoned any claim for specific performance of the May Agreement, thus abandoning any claim for an order which would have required Carraig Donn, in conformity with the May Agreement, to surrender, it seems to me to follow that under none of the relevant scenarios can it be said that the Lease has come to an end. 7. Conclusions 7.2 In the light of those findings, I would propose that the Court hear counsel further as to the orders which should be made on this appeal and, indeed, on the question of costs. |