United Scientific Holdings Ltd v Burnley Borough Council; Cheapside Land Development Co Ltd and Anor v Messels Service Co
[1977] 2 All ER 62(Judgment by: Viscount Dilhorne)
Between: United Scientific Holdings Ltd v Burnley Borough Council; Cheapside Land Development Co Ltd and Anor
And: Messels Service Co
Judges:
Lord Diplock
Viscount DilhorneLord Simon of Glaisdale
Lord Salmon
Lord Fraser of Tullybelton
Subject References:
LANDLORD AND TENANT
RENT
Review
Failure to comply with time limit
Construction of clause
Presumption that time not of the essence
Rebuttal of presumption
Contra-indications in express words of lease or in interrelation of rent review clause itself and other clauses or in surrounding circumstances
Failure to comply with time limit not precluding landlord from invoking clause unless presumption that time not of the essence rebutted
Retrospective operation
Certainty of rent
Increased rent determined under review clause payable from specified date
Increased rent not determined until after specified date
Whether increased rent payable retrospectively from specified date
Case References:
Accuba Ltd v Allied Shoe Repairs Ltd - [1975] 3 All ER 782; [1975] 1 WLR 1559; 30 P & CR 403; Digest (Cont Vol D) 581, 3952d
Bailey (C H) Ltd v Memorial Enterprises Ltd - [1974] 1 All ER 1003; [1974] 1 WLR 728; 27 P & CR 188, CA; Digest (Cont Vol D) 581, 3952e
Boone v Eyre - (1779) 1 Hy Bl 273 n; 1 Wms Saund 320 c; 2 Wm Bl 1312; 126 ER 160; 12 Digest (Reissue) 524, 3630
Cutter v Powell - (1795) 6 Term Rep 320; 101 ER 573; 12 Digest (Reissue) 146, 844
Essoldo (Bingo) Ltd's Underlease, Re, Essoldo Ltd v Elcresta Ltd - (1972) 23 P & CR 1; 31(1) Digest (Reissue) 480, 3951
Farrell v Alexander - [1976] 2 All ER 721; [1976] AC 59; [1976] 3 WLR 145, HL
Finch v Underwood - (1876) 2 Ch D 310; 45 LJCh 522; 34 LT 779, CA; 31(1) Digest (Reissue) 293, 2394
Greater London Council v Connolly - [1970] 1 All ER 870; [1970] 2 QB 100; [1970] 2 WLR 658; 134 JP 336, CA; Digest (Cont Vol C) 423, 144a
Gregson v Riddle - (1784) cited in 7 Ves at 268; 32 ER 109, LC; 40 Digest (Repl) 118, 916
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd - [1962] 1 All ER 474; [1962] 2 QB 26; [1962] 2 WLR 474, CA; 41 Digest (Repl) 363, 1553
Hughes v Metropolitan Railway Co - (1877) 2 App Cas 439; 46 LJQB 583; 36 LT 932; 42 JP 421, HL; 21 Digest (Repl) 392, 1221
Jackson v Union Marine Insurance Co Ltd - (1874) LR 10 CP 125; [1874-80] All ER Rep 317; 44 LJCP 27; 31 LT 789, Ex Ch; 12 Digest (Reissue) 484, 3435
Kenilworth Industrial Sites Ltd v E C Little & Co Ltd - [1975] 1 All ER 53; [1975] 1 WLR 143; 29 P & CR 141, CA; Digest (Cont Vol D) 580, 3952c
Knight, Re, ex parte Voisey - (1882) 21 Ch D 442; 52 LJCh 121; 47 LT 362, CA; 31(1) Digest (Reissue) 473, 3874
Lennon v Napper - (1802) 2 Sch & Lef 682; 12 Digest (Reissue) 382, 1437
Martindale v Smith - (1841) 1 QB 389; 1 Gal and Dav 1; 10 LJQB 155; 5 Jur 932; 113 ER 1181; 39 Digest (Repl) 744, 2216
Mount Charlotte Investments Ltd v Leek and Westbourne Building Society - [1976] 1 All ER 890
Parkin v Thorold - (1852) 16 Beav 59; 22 LJCh 170; 16 Jur 959; 51 ER 698; 12 Digest (Reissue) 381, 2760
Peeters v Opie - (1671) 2 Wms Saund 346; 85 ER 1144
Pordage v Cole - (1669) 1 Wms Saund 319; 1 Lev 274; 2 Keb 542; T Raym 183; 1 Sid 423; 85 ER 449; 12 Digest (Reissue) 523, 3624
Richards (C) & Son Ltd v Karenita Ltd - (1971) 221 Estates Gazette 25
Samuel Properties (Developments) Ltd v Hayek - [1972] 3 All ER 473; [1972] 1 WLR 1296; 24 P & CR 233, CA; 31(1) Digest (Reissue) 481, 3952
Schuler (L) AG v Wickman Machine Tool Sales Ltd - [1973] 2 All ER 39; [1974] AC 235; [1973] 2 WLR 683, HL; Digest (Cont Vol D) 123, 3613a
Seton v Slade, Hunter v Seton - (1802) 7 Ves 265; [1775-1802] All ER Rep 163; 32 ER 108, LC; 12 Digest (Reissue) 381, 2755
Smith v Hamilton - [1950] 2 All ER 928; [1951] Ch 174; 40 Digest (Repl) 242, 2042
Stickney v Keeble - [1915] AC 386; [1914-15] All ER Rep 73; 84 LJCh 259; 112 LT 664, HL; 40 Digest (Repl) 120, 942
Stylo Shoes Ltd v Wetherall Bond Street W1 Ltd - (1974) 237 Estates Gazette 343, CA
United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd, United Dominions Trust (Commercial) Ltd v Eagle Aviation Ltd - [1968] 1 All ER 104; [1968] 1 WLR 74, CA; Digest (Cont Vol C) 406, 18d
Wallis, Son and Wells v Pratt and Haynes - [1910] 2 KB 1003; 79 LJKB 1013; 103 LT 118, CA; on appeal [1911] AC 394; [1911-13] All ER Rep 989; 80 LJKB 1058; 105 LT 146, HL; 12 Digest (Reissue) 522, 3613
Walsh v Lonsdale - (1882) 21 Ch D 9; 52 LJCh 2; 46 LT 858, CA; 31(1) Digest (Reissue) 487, 4019
Watts and Attorney General for British Columbia v Watts - [1908] AC 573, PC
Weston v Collins - (1865) 5 New Rep 345; 34 LJCh 353; 12 LT 4; 29 JP 409; 11 Jur NS 190, LC; 40 Digest (Repl) 315, 2601
Judgment date: 23 March 1977
Judgment by:
Viscount Dilhorne
My Lords, I have had the advantage of reading the speeches in draft of my noble and learned friends, Lord Diplock and Lord Simon of Glaisdale. I do not think that any useful purpose would be served by my attempting the task they have accomplished so well of tracing the historical development of the common law and equity before and after 1873.
I agree with them in thinking that the effect of s 25(7) of the Supreme Court of Judicature Act 1873 was that from the time when that Act came into force, stipulations as to time in contracts were to be treated as they were in courts of equity; and in thinking that the scope of that subsection was not narrowed by the observations of Lord Paker of Waddington in Stickney v Keeble ([1915] AC 386 at 417, [1914-15] All ER Rep 73 at 82).
In Parkin v Thorold ((1852) 16 Beav 59 at 65) Lord Romilly MR said that under the doctrine of a court of equity-
'time is held to be of the essence of the contract ... only in cases of direct stipulation, or of necessary implication. The cases of direct stipulation are, where the parties to the contract introduce a clause expressly stating that time is to be of the essence of the contract. The implication that time was of the essence of the contract is derived from the circumstances of the case ... It is needless to refer to the authorities, which are numerous, to support these propositions.'
Section 25(7) of the Judicature Act 1873 was replaced by s 41 of the Law of Property Act 1925 which was to the same effect. I agree too that the law in relation to such stipulations in contracts is correctly stated in Halsbury's Laws of England. [F2] (See also Fry on Specific Performance.) [F3]
In the Burnley appeal, Buckley LJ was prepared to assume that the equitable rules that time was not of the essence of the contract unless that was expressly provided in the contract or the circumstances and nature of the contract were such that that intention was to be imputed to the parties applied to all kinds of contracts; and Roskill LJ said ([1976] 2 All ER 220 at 232, [1976] 1 Ch 128 at 147) that the right question to ask was whether-
'on the true construction of the particular clause ... the parties intend that the particular stipulations as to time should be strictly adhered to or not; or if, as happens in so many cases, the parties have not expressly dealt with this question, must there be imputed to the parties an intention that the particular stipulations as to time must be strictly adhered to or not.'
The Court of Appeal in that appeal held that such an intention was to be imputed in relation to the time stipulation then under consideration. The leases granted by the Burnley Corporation were for 99 years at a minimum rent of £1,000 a year payable half yearly in arrear 'plus any additional rent payable under the provisions' in a schedule to one of the two leases.
That schedule provided that the rent should be reviewed during the year preceding the second and every subsequent ten year period of the term and during the year preceding the final nine years. The parties were to agree the then current rack rent, and in default of agreement that was to be determined by arbitration. One quarter of the rack rent or £1,000 whichever was the greater, was to be the rent under each lease for the ensuing period.
The parties to these leases thus agreed that there should be rent reviews at fixed intervals. Leases which so provide are in my opinion to be distinguished from those which provide for a rent review only if one is initiated by the lessor.
Importance appears to have been attached in the Court of Appeal to a rent review only operating to the financial advantage of the lessor. In fact in the Burnley case the rent review might operate to reduce the rent for one ten year period below that payable in the preceding ten years if the current rack rent fell. But I do not think it true to say that a rent review clause if its operation can only lead to an increase in rent, only operates to the financial advantage of the lessor. If he is not prepared to agree to the inclusion of such a clause in the lease, a tenant may find a landlord unwilling to let except at a higher rent than he would demand if there was a review clause, in order to secure some protection against the effect of inflation during the currency of the lease. Indeed, in the absence of a review clause, the tenant may find a landlord unwilling to let for the term he desires.
I do not myself think it of any significance in considering whether time was of the essence in relation to a stipulation if a rent review could only lead to an increase in rent, for I do not think that the likely result of a rent review is any ground for imputing to the parties an intention that time should be of the essence. In the Burnley case the clause was clearly intended to secure that the ground rent should be kept in line with the current rack rent and in the Cheapside case, that the rent should be brought up to the current market rent. In neither case could the lessor impose any rent he wished.
The Court of Appeal in the Burnley case thought that such an intention was to be imputed on account of the commercial character of the leases. My noble and learned friend, Lord Diplock, has demonstrated that it does not suffice to attach that label to infer that time is of the essence.
The parties in the Burnley case undoubtedly desired that the review should be completed in the year preceding the commencement of a ten year period and of the final nine years but I do not see any reason for imputing to them an intention that time should be of the essence, an intention that there should be no change in the rent for the next ten years if the current rack rent was determined, it might be only a day, after the expiry of that year. They would naturally seek to reach agreement as to the current rack rent. Negotiations between them might take some time. Failing agreement, they were to agree on an arbitrator.
Failing agreement as to an arbitrator, they had to secure the nomination of one by the president of the Royal Institution of Chartered Surveyors and then there would be the arbitration. After the hearing some time might elapse before the arbitrator made his award. For circumstances beyond the lessors' control delivery of the award might be delayed beyond the year.
It is most unlikely in these circumstances that the lessors, if they had been asked at the time the leases were entered into to agree that time should be of the essence, would ever have agreed to that and I see no reason for imputing to them an intention which no reasonable landlord would have had.
Importance was attached in the Court of Appeal to the tenant knowing before the new period started what was to be the rent for this period. I do not think that much, if any, importance should be attached to this, for the tenant could easily find out what approximately the current rack rent for the properties might be.
In my opinion the imputation of any such intention to the parties to a lease containing a review clause intended to operate at stated periods is unwarranted.
The Cheapside appeal is more complicated. There the lease provided that if there was to be a rent review, it had to be initiated by the lessors.
They had to serve a notice on the lessees stating the proposed rent 'not more than twelve months not less than six months prior to the review date', those dates being 8 April 1975 and 8 April 1982.
I do not consider it to be an incorrect use of the English language to say that under this lease the lessors had an option. But it was an option of a very different character from an option to purchase property. It was an option to initiate machinery not to secure or to extend an interest in land, but merely to secure a variation of a term of the lease. For the reasons given by my noble and learned friend, Lord Simon of Glaisdale, it should not be equated with an option to purchase.
In this appeal the lessor gave a notice in accordance with the requirements of the lease and so in this appeal no question arises whether time was of the essence in relation to the giving of the lessors' notice.
Until that notice was given, the lessees would not know that there was to be a rent review. Until then they need not concern themselves about the current market rent nor need they incur expense in obtaining advice with regard thereto. If the parties when they entered into the lease had been asked whether they thought it essential that the lessors' notice should be given within the stipulated period, I think that they would have answered in the affirmative. I recognise of course that this would mean that if the notice was served a day late, the consequences to the lessors would be serious but it lay entirely within the lessors' power to serve the notice within that period whereas it does not lie within their power to secure that a valuation made by a valuer was made within the time stipulated.
While, as I have said, the question whether time was of the essence in relation to the lessor's notice does not have to be decided in this appeal, I differ from my colleagues in that I think that where a rent review has to be initiated by a lessor and is not automatic, then time is of the essence when it is provided that that notice initiating the review has to be given by a certain date.
Under the lease in the Cheapside case the lessees could serve a counter-notice on the lessors within one month after service of the lessors' notice. They did not do so. If the market rent was not agreed, it was to be valued by a fellow of the Royal Institution of Chartered Surveyors agreed on by the parties. If they did not agree on one, then one was to be appointed by the president of the Royal Institution of Chartered Surveyors 'not earlier than two months after service of the lessors' notice on the application of the lessors'. The clause did not provide that the application had to be made before a certain date. The schedule to the lease also provided that that valuation should be given 'to the lessors and the lessees not less than 14 days before the review date'.
The question for decision in this appeal is whether this time stipulation was of the essence. There was no valuation not less than 14 days before 8 April 1975 and it is now consequently contended that the rent cannot be reviewed.
Again it is clear that both parties desired that the valuation should, if they failed to agree the market rent, be received by them not less than 14 days before any increased rent became payable but again I see no reason for imputing to them the intention that if that did not happen, no rent review should take place even if the valuation was received only one day late with the consequence that for the next seven years the lessees would continue to enjoy the occupation of the property at a rent which might be considerably less than the market rent. In relation to this stipulation in my opinion the claim that time was of the essence fails.
I agree with what my noble and learned friend, Lord Diplock, has said with regard to the dates from which the revised rents would be payable and with his observations on the earlier cases.
For the reasons I have stated, in my opinion these appeals should be allowed.