United Scientific Holdings Ltd v Burnley Borough Council; Cheapside Land Development Co Ltd and Anor v Messels Service Co

[1977] 2 All ER 62

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Between: United Scientific Holdings Ltd v Burnley Borough Council; Cheapside Land Development Co Ltd and Anor
And: Messels Service Co

Court:

Judges: Lord Diplock
Viscount Dilhorne
Lord 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

Hearing date: 24-27, 31 January 1977, 1 February 1977
Judgment date: 23 March 1977

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ORDER

Burnley Corporation granted a company ('USH') a lease of premises for a term of 99 years from 31 August 1962. The lease provided that the rent would be £900 per annum for the first ten years of the term and thereafter £1,000 per annum plus any additional rent payable under the provisions contained in the schedule to the lease. The schedule provided, inter alia:

'During the year immediately preceding the period of the second ten years of the said term and during the year immediately preceding each subsequent ten year period of the said term and during the year immediately preceding the last nine year period of the said term (each of such periods being hereinafter referred to as a "relevant period") the [corporation] and [USH] shall agree or failing agreement shall determine by arbitration the sum total of the then current rack rent ... reasonably to be expected on the open market for leases of the Property ... and one quarter of the sum total so ascertained or One thousand pounds (whichever is the greater) shall be the rate reserved by this Lease in respect of the then next succeeding relevant period ...'

No action was taken by the corporation to avail themselves of the rent review provisions before 31 August 1972, which was the date on which the first ten years of the term limited by the lease terminated. On 12 October 1972 the corporation asked for the rent review provisions to be implemented. USH asserted that, since the ten year period had elapsed, the corporation were not entitled to require a rent review and USH brought proceedings to determine the rent payable under the lease.

The judge held that since the corporation had failed to exercise the right within the time limit prescribed by the schedule the rent remained at £1,000. The Court of Appeal ( [1976] 2 All ER 220 ) dismissed an appeal by the corporation, holding that no distinction could be drawn between a clause under which one party had an option to secure a rent review and one under which the rent review was obligatory, and that, unless a particular clause indicated the contrary such clauses were to be construed as providing that time was of the essence.

Cheapside Land Development Co Ltd ('Cheapside') granted a company ('Messels') a lease of parts of a building for a term of 21 years from 8 April 1968. For the first period of seven years the rent was £117,340 per annum payable in arrear on the usual quarter days. For the second and third periods of seven years the respective rents were to be determined in accordance with the provisions of Sch 2 to the lease. In respect of the determination of the rent for the second period of the term the schedule provided, inter alia, that 'the yearly rent shall be the sum of ... (£117,340) or a sum equal to the market rent (if duly determined in the manner hereinafter set out) whichever shall be the higher ... ' The procedure for determining the market rent had to be initiated by Cheapside by a notice in writing served not more than 12 months nor less than six months prior to the review date, 8 April 1975. The notice constituted an irrevocable offer for one month during which it was open to Messels to accept Cheapside's proposal or to make a counter-offer. At least two months were to be allowed to elapse after service of Cheapside's notice during which time an agreement as to the rent could be negotiated or the parties could agree on the appointment of a fellow of the Royal Institution of Chartered Surveyors ('the RICS') to determine the rent as an expert valuer. If the negotiations failed and no agreement was reached on the person to be appointed as valuer, Cheapside, after the lapse of the two month period, could apply to the president of RICS to appoint a valuer who was to notify both parties of his valuation not less than 14 days before the review date. Cheapside gave Messels notice in respect of the period starting 8 April 1975 within the period specified in the lease.

Negotiations between the parties followed but no agreement was reached either as to the new rent or on a valuer to determine it. Cheapside delayed in applying to the president of the RICS until some ten weeks after the review date. In consequence the president refused to comply with the request without a ruling of the court that the application was a valid and effective application for the purposes of rent review provision. Cheapside accordingly issued an originating summons claiming a declaration to that effect and a declaration that the valuation by a fellow of the RICS appointed pursuant to the application would be valid and binding on Messels notwithstanding that it would not be given until after 27 March 1975, ie the date which fell 14 days before the review date. Cheapside also sought a declaration that the market rent as determined by the valuer if higher than £117,340 per annum would be recoverable restrospectively to the review date. The judge granted the declarations sought. On appeal the Court of Appeal, following its decision in the first appeal, set aside the judge's order.

Both the corporation and Cheapside appealed against the respective decisions of the Court of Appeal, the appeals being heard together.

Held

(i)

The question whether the time limits prescribed by a rent review clause were to be treated as being of the essence of the contract did not depend on whether or not the clause could be construed as conferring an option on the landlord; such a clause could not in any event be considered as being in the nature of a true option since the effect of its exercise was not to create a new contract or to determine an existing one; the obligation imposed on the tenant by such a clause was part of the whole consideration for the landlord's grant of a term of years of the length agreed.

In the absence of any contra-indications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances, the presumption was that the time limits specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date was not of the essence of the contract.

That was so (Viscount Dilhorne dissenting) eve where the rent review was not automatic and had to be initiated by the lessor. There was nothing in either of the leases to displace the presumption that strict adherence to the timetable specified in the rent review provisions was not of the essence of the contract. Accordingly the corporation and Cheapside were entitled to invoke the rent review provision notwithstanding that the time limits prescribed by those provisions had expired.

The appeals would therefore be allowed (see p 72 d to j, p 73 j to p 74 b, p 75 f and j to p 76 a, p 79 a to c and h, p 80 b and f to h, p 83 f, p 84 h to p 85 e, p 86 j to p 87 c, p 88 e to h, p 89 b to e, p 90 d e and h, p 92 f and g, p 93 a to d, p 94 e and f, p 95 g, p 96 d, p 97 d to f and p 98 a to c, post); dicta of Lord Romily MR in Parkin v Thorold (1852) 16 Beav at 65 and of Lord Denning MR in United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 All ER at 107 applied; dictum of Lord Parker of Waddington in Stickney v Keeble [1914-15] All ER Rep at 82, Kenilworth Industrial Sites Ltd v E C Little and Co Ltd [1975] 1 All ER 53 and Accuba Ltd v Allied Shoe Repairs Ltd [1975] 3 All ER 782 explained; Samuel Properties (Developments) Ltd v Hayek [1972] 3 All ER 473 and Mount Charlotte Investments Ltd v Leek and Westbourne Building Society Ltd [1976] 1 All ER 890 overruled.

(ii)

Other than for the purposes of the remedy of distress the expression 'rent' was to be construed as meaning the contractual sum payable under the terms of a lease.

There was therefore no requirement that, to be recoverable by the landlord, rent had to be certain at the date when it fell due. It followed that once the increased rents had been determined under the provisions of the rent review clauses the balance was payable retrospectively from the review dates in the respective leases (see p 76 f to h, p 80 f, p 86 a to c, p 93 e to g and p 99 c and d, post); C H Bailey Ltd v Memorial Enterprises Ltd [1974] 1 All ER 1003 approved; Walsh v Lonsdale (1882) 21 Ch D 9 and Re Knight, ex parte Voisey (1882) 21 Ch D 442 distinguished.

Decision of the Court of Appeal sub nom United Scientific Holdings Ltd v Burnley Corpn [1976] 2 All ER 220 reversed.

Notes

For agreements to review rents subject to a time limit for giving notice, see Supplement to 23 Halsbury's Laws (3rd Edn) para 1197.

Appeals

By an originating summons dated 4 December 1973 the respondents, United Scientific Holdings Ltd, sought, inter alia, the determination of the following questions:

(A)

whether on the true construction of a lease dated 31 August 1962 and made between the appellants, the Council of the Borough of Burnley (formerly the Mayor, Aldermen and Burgesses of the County Borough of Burnley) and E Cookson (Properties) Ltd, and of a supplemental lease dated 29 September 1967 and made between the same parties, the rent reserved by each of the leases during the ten years of the respective terms immediately prior to 1 August 1982 was

(i)

£1,000,

(ii)

a rent to be determined in accordance with the provisions of Sch 3 to the 1962 lease, or

(iii)

some other and if so what rent; and

(B)

if the answer to question (A) was a rent to be determined,

(i)

whether the rents were to be payable

(a)

from 31 August 1972,

(b)

from the date of determination of the rent or

(c)

from some other and if so what date, and

(ii)

by what criteria the rents fell to be determined.

On 13 May 1974 Pennycuick V-C made an order declaring that on the true construction of the lease and underlease and in the events which had happened the annual rent reserved by the lease and the supplemental lease during the ten years of the respective terms immediately prior to 1 August 1982 was £1,000. The appellants appealed. On 1 March 1976 the Court of Appeal ( [1976] 2 All ER 220 ) (Buckley, Roskill and Browne LJJ) dismissed the appeal and affirmed the order of Pennycuick V-C.

By an originating summons dated 27 June 1975, as re-amended, the appellants,

(1)

Cheapside Land Development Co Ltd and

(2)

St Martins Property Investments Ltd, sought the following relief:

(1)

a declaration that the application made by the ( [1977] 2 All ER 62 at 66) first appellant by a letter dated 25 June 1975 to the president of the Royal Institution of Chartered Surveyors for the appointment of a fellow of the Institution to value the market rent of premises known as third and fourth floors, Winchester House, Old Broad Street, London, EC2, for the period commencing on 8 April 1975 and ending on 8 April 1982 was a valid and effective application for the purposes of para 3(c) of Sch 2 to a lease dated 13 March 1968 and made between

(i)

the first appellant,

(ii)

the respondents, Messels Service Co, and

(iii)

John Arnott Hunter and Robert Henry Calvert;

(2)

a declaration that the valuation of the fellow of the Institution appointed pursuant to the first appellant's application would be valid and binding on the appellants and the respondents as to the market rent notwithstanding that the valuation would not be given until after 25 March 1975 (being 14 days before the relevant review date under Sch 2 to the lease); and

(3)

a declaration that such market rent (if higher than the rent of £117,340 per annum) would be recoverable as rent under the lease with effect from 8 April 1975. On 29 January 1976 Graham J appealed. On 21 May 1976 the Court of Appeal (Stamp, Scarman and Goff LJJ) allowed the appeal and discharged the order of Graham J.

The Council of the Borough of Burnley, Cheapside Land Development Co Ltd and St Martins Property Investments Ltd, appealed to the House of Lords against the respective orders of the Court of Appeal. The appeals were heard together. The facts are set out in the opinion of Lord Diplock. H E Francis QC and B C Maddocks for the appellants in the first appeal.

A J Balcombe QC and Benjamin Levy for the respondents in the first appeal.

N C H Browne-Wilkinson QC and Nigel Hague for the appellants in the second appeal.

A J Balcombe QC and E G Nugee for the respondents in the second appeal.

Their Lordships took time for consideration.

23 March 1977. The following opinions were delivered.