High Court of Justice in Northern Ireland Chancery Division Decisions

Blu Property Management Ltd v. Sweeney [1998] NICh 4; [1999] NIJB 4 (27th November, 1998)

Delivered:
27 November 1998

GIRA2653 1998 No 210

IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND

CHANCERY DIVISION

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BETWEEN:

BLU PROPERTY MANAGEMENT LIMITED

Plaintiff;

and

1. DENNIS SWEENEY

2. FRANCES SWEENEY

3. JOHN FATHERSTONE

4. SUSAN FATHERSTONE

Defendants.

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JUDGMENT

GIRVAN J

1. This matter comes before the court by way of an originating summons raising questions as to the effect of a rent review clause in a lease dated 29 May 1987 ("the Lease") made between the plaintiff's predecessor in title and the defendants in respect of premises known as Unit 12 Connswater Shopping Centre, Belfast ("the premises").

2. By the Lease Connswater Property Limited, the plaintiff's predecessor in title, demised the premises to the defendants for 25 years from 1 May 1987 subject to a peppercorn rent to 1 June 1987, a yearly rent of [sterling]23,000.00 to 1 May 1992 and thereafter during the remainder of the term subject to a yearly rent to be ascertained in accordance with the provisions of the Third Schedule in the Lease. Rent was to be payable quarterly in advance. The provisions of the Third Schedule are material to these proceedings and that Schedule provides:-

"At any time after the 1st of May 1992 and at or at any time after each 5th anniversary of the 1st of May 1992, the Lessor may by at least three months prior notice in writing served on the Lessee, revise the rent payable under this deed which shall from the date of expiration of such notice be such sum as shall (in default of agreement between the Lessor and Lessee within two months after service of such notice) be determined by a valuer nominated at the request of the Lessor by the President for the time being of the Royal Institution of Chartered Surveyors to represent the rack rental value of the property for a term of years equal to the then unexpired residue of the term granted by this deed with vacant possession and taking no account of any goodwill attributable to the premises by reason of the tenant's business or any alterations or additions made to the property by and at the cost of the Lessee otherwise than in pursuance of an obligation to the Lessor but in all other respects by reference to the terms of this deed (including this sub-clause) Provided that:-

(i) the rent so revised shall not be less than that reserved immediately prior to such date or anniversary as the case may be;

(ii) the rent shall be revised once only during each period of five years commencing at such date or anniversary as the case may be;

(iii) any submission to a valuer under this sub-clause shall be deemed to be a submission to a single arbitrator in accordance with the Arbitration Act (NI) 1937 (as amended or re-enacted from time to time)".

3. The lessor and the defendants entered into an associated lease relating to an external store associated with the premises.

4. It is not in dispute that the plaintiff now holds the reversionary interest in the premises demised by the lease. It is also agreed that the rent was reviewed with effect from 1 May 1992 when the rent was increased to [sterling]33,500.00 ("the 1992 rental level").

5. On 22 January 1997 the agents acting for the lessor gave notice to the defendants in the following terms:-

"On behalf of our clients and pursuant to the Third Schedule of the said Lease, we hereby give you notice of the revision of the annual rent payable under your Lease, such revision to take effect on 1 May 1997. We hereby give you notice that our clients will require the said annual rent to be increased to [sterling]55,000.00 plus VAT on that date."

6. It is not in dispute that the notice was duly served on the defendants.

7. After service of the notice the defendants did not serve any document accepting or rejecting the purported rent of [sterling]55,000.00 plus VAT and the plaintiff did not proceed to apply to the President of the Royal Institution of Chartered Surveyors to appoint a valuer to fix a reviewed rent in accordance with the formula set out in the Third Schedule. On 14 May 1997 a rent demand was sent by the plaintiff to the defendants for the quarter due on 1 May 1997. It is common case that the rent demand was at the 1992 rental level. Payment was made at that rate and following receipt of the remittance the plaintiff wrote to the defendants thus:-

"We write to acknowledge receipt of your remittance for [sterling]11,795.32 in settlement of rent and estimated service charges due on the above premises for the quarter due 1st May 1997 which is accepted without prejudice to the negotiations for the outstanding rent review due on 1st May 1997".

8. The defendants solicitor replied stating:-

"I would confirm that the acceptance of rent has been duly made herein on the Gale day and we place this on record as an open letter setting out that the review has thus been settled".

9. In the originating summons the plaintiff seeks determination of the question whether in the events which have happened and upon the true construction of the Lease the plaintiff is entitled to proceed with the rent review under the Third Schedule of the lease initiated by the notice.

10. In presenting the case for the defendants Miss Simpson argued that the matter in dispute between the parties was not one suitable to be determined on foot of an originating summons since it was necessary to make a factual determination of the parties' intentions at the time of the demand for the payment of rent at the 1992 rental level and at the time of the payment and receipt thereof. She contended that the letter of 22 January 1997 was not an effective notice complying with the requirements of the Third Schedule being in effect a unilateral demand for rent at an increased rate and she contended that the payment of the rent at the 1992 rental level and its acceptance by the plaintiff gave rise to a binding agreement that the rent should continue to be at that level. By demanding rent at the old level the plaintiff had in fact evinced an intention to waive the rent increase demand.

11. Notwithstanding the attractive and persuasive way in which Miss Simpson ably presented the case for the defendants, I am satisfied that the plaintiff must succeed in its argument that the rent review should proceed and that the demand for and receipt of rent at the 1992 rental level does not preclude the plaintiff asserting its right to have the rent review completed in accordance with the Third Schedule.

12. The Third Schedule of the Lease does not prescribe any particular form of notice. It does require the lessor to give at least three months prior notice in writing and the timescale of the letter of demand did comply with the prescribed timetable. The Schedule requires the landlord to "review the rent". It does not prescribe whether this is to be done in any particular way (eg by specifying rent which the lessor asserts should be the new rent or by specifying that the rent falls to be reviewed by agreement or in default of agreement by the valuer). The trend of modern authority is to require rent review clauses to be given a sensible workmanlike interpretation having regard to the realities of modern economic conditions although any ambiguity should be construed against the lessor on the contra proferentem rule of construction. In the present case, giving the clause a sensible interpretation there is no reason why the lessor should not specify the rent that it contends should on review be paid for the premises. In the absence of agreement within the two month period a valuer would have to be appointed to determine the rent. The lessor's demanded rent would not in any way bind the valuer who would be bound to assess the rent in accordance with what is prescribed in the Schedule. I am satisfied that the notice was a valid notice and set in train the review mechanisms provided for in the Third Schedule.

13. Until the rent is agreed or fixed by the valuer (neither of which has happened) the rent remains payable at the existing rate and the defendants as lessees continue to be bound to pay the rent at that level until the rent review has been completed. By demanding rent at that level there is nothing to suggest that the lessor had either waived the notice or by acceptance of the rent at the 1992 rental level had accepted or conceded that the rent should continue at that level.

In United Scientific Holdings v Burnley Borough Council [1977] 2 All ER 62 the courts had to construe the effect of a rent review clause which made provision for the rent to be reviewed as from 8 April 1975. Lord Diplock pointed out:-

"Under the rent review clause in the instant case the market rent as determined in accordance with the provisions of the clause if higher than [sterling]117,340.00 per annum is expressed to be payable in respect of the second period viz the seven years starting on 8th April 1975. Until a market rent has been ascertained the landlords can only recover rent at the rate of [sterling]117,340.00 per annum, which corresponds to the minimum rent under Walsh v Longsdale (1882) 21 Ch D 9. It is only when the market rent has been determined and turns out to be higher than [sterling]117,340.00 that the landowner can recover on the rent day following such determination the balance that has been accruing since 8th April 1975. Therein lies the economic advantage to the tenant of delay in the determination of the market rent to which I have previously referred."

(underlining added)

14. It is clear from that passage that the landlord continues to be entitled to recover rent at the unreviewed old rate until the rent review is completed whereupon the landlord can recover on the next rent day falling due after the determination of the rent review the balance of the reviewed rent retrospectively to the review date. In this case the lessor's demand for rent at the 1992 rental level was perfectly consistent with its case that the rent fell to be reviewed in accordance with the Third Schedule.

In Amherst v James Walker Goldsmith and Silversmith Limited [1983] 2 All ER 1067 the court had to consider the effect of the relatively long delay by a landlord in serving a review notice under a clause in respect of which time was not of the essence in relation to the rent review mechanisms. The tenant argued that the lessor's delay in serving the notice was such that he ought to be deemed to have abandoned his right to a rent review and that the delay was in any event unreasonable and invalidated the notice. The Court of Appeal held that mere delay, however lengthy and even coupled with hardship to the tenant, did not destroy the contractual rights which the landlord had to serve the notice. In order to show that the landlord was precluded from exercising his right to serve the notice despite the delay the tenant had to show that the lease or the agreement relating to the review of rent had been abrogated by mutual agreement or that the contract had been repudiated by the landlord or that the landlord's conduct was such that he was estopped from exercising his right to serve notice.

15. Oliver LJ at 1075 said:-

"In particular, I cannot, speaking for myself, see how the right can be lost by abandonment. So far as I am aware, this is not a term of art but I take it to mean the unilateral signification of an intention not to exercise the contractual right in question. If that is right, then I cannot see how it could bind the landlord save with a promise (promissory estoppel) or as a representation followed by reliance (equitable estoppel) or as a consensual variation of the agrement or as a repudiation accepted by the other party. I know of no grounds for importing into the law of contracts the notion that mere non exercise of a contractual right is to be treated as analogous to an abandonment of chattels or of an appurtenant right to an easement".

16. In this instance the plaintiff's notice was for the reasons indicated above a valid review notice. The plaintiff had initiated the rent review procedure and had not abandoned its contractual rights to have the review completed either by demanding or receiving the rent at the 1992 rental level (which was all that the landlord was presently contractually entitled to) or by any delay in having a valuer appointed.

17. Whatever the defendants belief or understanding following the receipt of the rent, the contractual rights of the parties must be determined in accordance with the objective facts and in accordance with law. In the absence of any evidence that the defendants acted to their detriment in reliance upon a representation by the plaintiff that they were not going to proceed with the review (a case which could not be made out in the circumstances) the defendants' state of mind in the circumstances is irrelevant. Accordingly, I am satisfied that this matter can be properly dealt with on foot of the originating summons and in the result I hold that the plaintiff is entitled to proceed with the rent review under the Third Schedule. 1998 No 210

IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND

CHANCERY DIVISION

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BETWEEN:

BLU PROPERTY MANAGEMENT LIMITED

Plaintiff;

and

1. DENNIS SWEENEY

2. FRANCES SWEENEY

3. JOHN FATHERSTONE

4. SUSAN FATHERSTONE

Defendants.

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J U D G M E N T

OF

GIRVAN J

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