|Judgments - Mannai Investment Co. Ltd v. Eagle Star Assurance continued|
|(back to preceding
In Micrografix the tenants gave a notice determining the lease on 23 March 1995 when under the relevant clause they could only have done so on 23 June 1995. Jacob J. held that, as the landlords knew that the date of determination could only be 23 June 1995, they would not have been misled, and the notice should therefore be treated as an effective notice to determine the lease on the correct date, viz. 23 June 1995. In my opinion that decision was contrary to the long established line of authority, including Hankey v. Clavering  2 K.B. 326, by which Jacob J. was bound. It failed to give effect to the underlying principle that the notice must, on its true construction, conform to the agreed specification in the applicable clause, failing which it will not under the contract be effective for its purpose. On its true construction it could not be read as a notice taking effect on 23 June 1995, because there was no reason to believe that the landlords must have intended to give a notice on that date; on the contrary, in all probability they gave the wrong date as a result of a mistaken view of their rights. I wish to add that the invocation of Goulding J.'s test by the Court of Appeal in Germax Securities Ltd. v. Spiegel (1978) 37 P. & C.R. 204 reveals no such error, because (as Buckley L.J. pointed out at p. 206) the mistaken date in that case was not in the operative part of the notice.
Mr. Cherryman also relied upon the decision of the Court of Appeal in Delta Vale Properties Ltd. v. Mills  1 W.L.R. 445, in which the test propounded by Goulding J. in Carradine was referred to in the judgment of Slade L.J., at p. 454. That case was concerned with the meaning and effect of notices to complete served by a vendor on a purchaser of land. Under the contract it was provided that, upon service of such a notice, the transaction should "be completed within 15 working days of service and in respect of such period time shall be of the essence". The notices however substituted a period of 28 days for the period of 15 days. The purchaser, lacking the necessary funds, failed to complete within the period of 28 days; then, having obtained the necessary funds a few days later, sought specific performance of the contract. The vendor claimed that he had rescinded the contract on the purchaser's failure to comply with the notice to complete. The question at issue was whether that notice was effective. The Court of Appeal held that it was. Slade L.J. said, at p. 455, that there was only one sense in which any reasonable recipient would have read it, viz. that the vendor would not exercise the rights conferred by the contract (to rescind if the purchaser did not complete within 15 days), provided that the purchaser completed within 28 days. Bingham L.J., who reached the same conclusion, said, at p. 457:
I can see nothing in the judgments in this case which detracts from the principles which I have already stated.
In the end Mr. Cherryman was forced to submit in his reply that Hankey v. Clavering should be overruled. In doing so, he was faced with the dual handicap, first, that no such argument had been foreshadowed in his printed case, and second, that he was in truth inviting your Lordships to overrule not merely Hankey v. Clavering itself but the long line of authority which had preceded it. Even so, I have considered with some care whether your Lordships should accept this submission. In doing so I have, as previously stated, recognised that, on occasion, the recipient of a notice under, for example, a break clause in a lease may, as here, treat it as ineffective because it does not comply with the contractual specification, even though he must have been aware that the giver of the notice intended to comply with the clause and only failed to do so through a mistake on his part. I am, however, driven to state that there are formidable obstacles in the way of Mr. Cherryman's submission.
The suggestion is that a more relaxed approach be adopted to the construction of notices of this kind, so that, if it is clear that the giver of the notice intended to comply with the provisions of the clause, he should be held to have done so, despite an erroneous choice of the date on which the notice is to take effect. It was submitted that, provided that this test is expressed in sufficiently strict terms, so that the recipient is left in no reasonable doubt that the giver of the notice intended to comply with the clause, this approach should not lead to any undue uncertainty in its application. This latter argument I do not find persuasive. There is a wide range of possible errors, and there are bound to be cases on the borderline in which there is doubt whether the intention is sufficiently clear. More fundamentally, however, it seems to me that the adoption of such a test in truth requires that a new meaning should be given to clauses of this kind, so that they are read as requiring no more than that the giver of the notice should express a clear intention to exercise his rights under the clause, instead of requiring that the date on which it is to take effect must be expressly identified, either as such or with reference to the terms of the clause.
I have no doubt that this may indeed be the meaning properly to be attributed to many contractual provisions conferring a right exercisable upon notice. But the difficulty in the way of so holding in the case of clauses in leases, such as the break clause in the present case, is that for well over a century a different construction has been placed upon them. Innumerable leases, many of them still in force, must have been drafted on the understanding that they bear the well-known meaning established in the authorities. It follows that, quite apart from the element of uncertainty to which I have referred, the step which your Lordships are being invited to take would have a retrospective effect. In these circumstances I am most reluctant to depart from the established meaning unless I am persuaded that there is very good reason to do so.
In considering this question, I start from the position not only that the established meaning is clear and well-known, but also that the trap which the tenant fell into in the present case is easily avoided by adopting the familiar stratagem of invoking, as an alternative to the specified date, a date identifiable by reference to the terms of the clause itself. In these circumstances I am driven to wonder how often it occurs that, among the numerous notices of this kind which are given each year, mistakes of this kind are made. I simply do not know; though I cannot help suspecting that such cases are very few. If they were more frequent than I suspect, it would be surprising if there was not a greater move for such clauses to be drafted in different terms, or even for the legislature to require that such clauses should be read as having a different effect. In these circumstances I find myself responding to the submission made by Mr. Patten Q.C., in his admirable argument on behalf of the respondent landlords, that it is inadvisable for the judges to disturb this well-settled branch of the law. After all, the number of notices given each year under leases must be very great. Their effect, if challenged, will ordinarily fall to be considered in the County Court. At present, the applicable law is clear and well-settled, and Mr. Patten informed your Lordships that disputes were rare. In these circumstances the change in the law now proposed would not, in my opinion, be justified.
For these reasons, I would dismiss the appeal.
LORD JAUNCEY OF TULLICHETTLE
Clause 7(13) of each lease empowered the appellant as tenant to terminate the lease by serving not less than six months notice "to expire on the third anniversary of the term commencement date [to] determine this lease and upon expiry of such notice this notice shall cease and determine . . . ." The words underlined (by me) refer to the expiry of the period of not less than six months which must be contemporaneous with the termination of the lease. It is agreed that the third anniversary expired on 13 January 1995. However the notices, although stated to be pursuant to clause 7(13) bore to determine the leases on 12 January, the day before a notice given in accordance with that provision could expire. The question is whether the reference to 12 instead of 13 January is fatal to the validity of the notices. The Court of Appeal, reversing the decision of the judge, held that it was.
Notices terminating a tenancy are technical documents because they are effective without the consent of the receiver. It is therefore essential that they conform to the statutory or contractual provisions under which they are given. In Cadby v. Martinez (1840) 11 Ad. & El. 720, Lord Denman C.J., at p. 726, observed that a covenant in a lease "cannot be got rid of by any notice to quit which is not in accordance with the proviso introduced into the lease for the purpose". This proposition was expressly approved more than a hundred years later in Hankey v. Clavering  2 K.B. 326, 330 by Lord Greene M.R. Mr. Cherryman Q.C. for the tenants in his opening speech accepted this proposition but argued that properly construed the notices did accord with clause 7(13) of the lease inasmuch as the specific reference thereto predominated over the subordinate and unnecessary reference to the date 12 January. The notices would have been perfectly good if the words "12 January 1995" had been omitted. My Lords, I reject this contention. Clause 7(13) required that the notice be expressed to expire in accordance with the provisions thereof. This could be achieved either by reference to the correct date or by repeating the formula "to expire on . . . " in the clause. This was the form of notice which the tenants had agreed to serve but which in the event they did not. The notice contains within itself a specific date upon which the tenancy is to determine. Is that date to be construed as another date because of the reference to the empowering provisions of clause 7(13) or are those provisions to be construed as authorising notices which do not strictly conform to what has been agreed? In Hankey v. Clavering the Court of Appeal had to determine the validity of a landlord's notice to quit which purported to terminate a tenancy some four days before the break clause in the lease permitted this to be done. In terms of the lease termination thereof could properly take place on 25 December 1941 whereas the notice was in inter alia the following terms (p. 327):
In accepting that the date in the notice was obviously a slip Lord Greene M.R. rejected the temptation to put a strained construction on the document in order to aid someone who had made an unfortunate slip. At pp. 329-330 he said:
I take from these observations the proposition that if a notice to quit is ex facie clear and specific as to a matter such as the subjects to which it relates or the date upon which it is to operate it matters not that consideration of the empowering provision demonstrates a discrepancy between it and the notice. The case of ambiguity to which Lord Greene M.R. referred was one appearing on the face of the notice and not one which was only apparent from a consideration of the lease. Indeed it was implicit in the notice in that case that it was given in pursuance of the landlord's contractual powers with which it did not accord. However, the conflicting terms of the lease did not save it. Furthermore I can see no reason for construing clause 7(13) as permitting non-conforming notices.
It was argued that the specific reference to clause 7(13) distinguished this case from Hankey v. Clavering. I disagree. If it were appropriate to read into an otherwise clear and specific notice a contractual power for the purpose of substituting a correct for an incorrect date Lord Greene M.R. would no doubt have done so, given his observation as to the court endeavouring to give validity to a document. I see no difference in principle between an implied reference to a contractual provision and an express one. If Hankey v. Clavering is still good law then the notice given by this tenant was ineffective.
I turn to consider whether the law has, as Mr. Cherryman submitted, during the last 50 years developed a more flexible attitude to notices to quit which contained inaccuracies. In Carradine Properties Ltd. v. Aslam  1 W.L.R. 442 Goulding J. held that a notice by landlords correctly dated 6 September 1974, to determine a lease on 27 September 1973 would be interpreted as a notice to determine on 27 September 1975, a date which accorded with the provisions of the break clause. The judge after referring to the need for a party to comply strictly with the requirement for the exercise of an option or break clause continued, at p. 446C:
In this passage the judge was contrasting the situation where it was apparent from the face of the notice that the date of determination must be mistaken because it had already passed with one where the date of determination had yet to come and where it could not therefore be seen from the notice itself that the date was inserted in error. Mr. Cherryman argued that the judge was correct in relation to the first situation but wrong in relation to the second. In my view the distinction drawn by Goulding J. was entirely logical. In the first situation, which was the case before him, it only required a glance at the notice to see that the date of determination must be a mistake. This was not the position in Hankey v. Clavering  2 K.B. 326. In the second situation there was nothing within the four corners of the notice which showed that 1976 was a mistake. This was the position in Hankey v. Clavering.
In Delta Vale Properties Ltd. v. Mills  1 W.L.R. 445 a contract for sale of property provided inter alia for service of a completion notice requiring the transaction to be completed within 15 days. The seller served such a notice requiring completion within 28 days and the buyers challenged its validity. The Court of Appeal held that the notice was valid since a reasonable reader thereof could only have concluded that the notice was intended to be one conforming to the empowering provision and that the sellers were giving him 28 days instead of 15 to complete. This was not a case of a party serving a notice which he was not empowered to serve but rather of a party exercising forbearance in the strict compliance with a contractual term in his favour by giving, as he was entitled, to do, a longer period of notice than was required. The case is no support for the tenant's argument that 13 January should be substituted for 12 January. In Micrografix v. Woking 8 Ltd.  2 E.G.L.R. 32 the provisions of a lease entitled tenants to give not less than 12 months notice of their intention to determine the lease on 23 June 1995. In January 1994 they sent a letter stating that they were enclosing a notice determining the lease on 23 March 1995, which notice stated the date of determination as 23 March 1994. Jacob J. in holding that the notice was valid because the landlords would not have been misled by the pair of wrong dates and would have seen exactly what the tenants intended, observed that Carradine Properties Ltd. v. Aslam  1 W.L.R. 442 was the modern approach to construction of documents which was more in favour of making them work than in the past. After referring to Goulding J.'s second situation, he stated, at p. 33:
My Lords I consider that Jacob J. was in error in placing so much reliance on the understanding of the landlord. Lord Greene M.R. in the passage from Hankey v. Clavering  2 K.B. 326, 329-330, to which I have already referred emphasised that even certainty by a recipient that a date was a slip would not cure the defect and this view was echoed in the Court of Appeal in this case by Nourse L.J.  1 W.L.R. 1508, 1513F-G. In Delta Vale Properties Ltd. v. Mills  1 W.L.R. 445, 455F, Slade L.J. accepted at p. 4555F that the absence of confusion or prejudice on the part of the recipient was irrelevant. Their Lordships were referred to no other case in which this approach had been questioned nor the stricter approach of Lord Greene M.R. in Hankey v. Clavering  2 K.B. 326, 329-330, doubted. Micrografix  2 E.G.L.R. 32 was the only case cited in argument in which the court had construed a specific date as other than that stated and in which the error did not, as in Carradine, proclaim itself from the face of the notice. I consider that it was wrongly decided.
Hankey v. Clavering is a case of considerable authority, which has stood unchallenged and been applied for more than 50 years. Mr. Cherryman only sought to challenge it with no great enthusiasm in the last speech. I am not persuaded that there is any good reason for departing from the principles enunciated by Lord Greene M.R. It would be tempting to say that where a notice is disconform to that stipulated in the relevant empowering provision due to a slip which was obvious to any reasonable receiver thereof it may be construed so as to conform. However I can see considerable difficulties arising out of the application of such a principle. On one view it could be said that the giver of a notice empowered by a contractual provision always intends to comply with that provision thus however far such notice departed from what was contractually required it could be construed to conform with such requirements. On another view it could be argued that a notice which departed substantially from what was required cannot have been intended to conform but was intended to depart from contractual requirements or given in ignorance thereof. Where is the line to be drawn between defective notices which can and those which cannot be construed so as to conform: Such possibilities would create inevitable uncertainties which as Mr. Patten Q.C. for the landlord submitted would be likely to lead to increased litigation. There will, of course, be cases where an unintended slip in the drafting of a notice will result in hardship to the giver thereof but he will only have himself to blame for not complying with the terms of the empowering provision. Against this, however, must be measured the advantage to the recipient of certainty inasmuch as a date in a notice is to be read as stated unless it is obvious from the face of the notice that it must be mistaken.
Applying Lord Greene M.R.'s principles to this case, the tenant had no power under clause 7(13) to determine the lease on 12 January from which it follows that their notice was ineffective.
My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley with whose reasoning I am in entire agreement. I would therefore dismiss the appeal.
The short but not uncomplicated question is whether notices given by a tenant to a landlord purportedly under a right to determine reserved in terms of leases for fixed terms were effective to determine the leases.
The landlord is Eagle Star Life Assurance Co. Ltd. The tenant is Mannai Investment Co. Ltd. There are two leases both dated 11 March 1992. The demised property consists of office premises and car parking space in London, S.W.1. The two leases demised the office premises and the car parking space in each case "For the term of 10 years subject to the provisions of clause 7(13) hereof from and including 13 January 1992. . ." Clause 7 (13) of each lease provided as follows:
Under each lease the term granted included 13 January as the first day of the term. The "term commencement date" in clause 7(13) was not defined in either lease. But it is common ground that by reason of the words "from and including 13 January 1992" it was that date. Accordingly, it was agreed that the third anniversary of the "term commencement date" was 13 January 1995.
By two letters dated 24 June 1994 and served on the landlord more than 6 months before 13 January 1995 the tenant gave notice to the landlord in respect of each lease as follows:
The tenant contended that the leases were determined by the notices. The landlord claimed that the notices did not comply with the right reserved under clause 7(13) and that the notices were ineffective in law.
By an originating summons the tenant sought a declaration that the notices effectively determined the leases. The matter came before His Honour Judge Rich Q.C., sitting as a judge of the High Court in the Chancery Division. Relying on Sidebotham v. Holland  1 Q.B. 378 Judge Rich held that the notices were good inasmuch as they did not take effect until that moment of time which was both the last moment of 12 January and the first of 13 January, so that they did determine the leases on 13 January. The landlord appealed to the Court of Appeal.
Two issues were debated in the Court of Appeal. The first was whether, despite the erroneous reference in the notices to 12 rather than 13 January, the notices were nevertheless as a matter of construction sufficiently clear to be effective: this was described as the construction point. The second issue was whether the notices were saved by what was called the special rule in Sidebotham v. Holland. The Court of Appeal decided both issues against the tenant: Mannai Investment Co. Ltd. v. Eagle Star Insurance Co. Ltd.  1 W.L.R. 1508. The Court of Appeal held that the notices did not determine the leases.
On the appeal to your Lordship's House counsel for the tenant again advanced both arguments. The point of construction is one of substance. Despite a lucid argument by junior counsel for the tenant your Lordships were of the view, which I shared, that the argument based on Sidebotham v. Holland  1 Q.B. 378 was plainly wrong and did not find it necessary to call on counsel for the landlord to reply on this issue. As Nourse L.J.  1 W.L.R. 1508, 1515F trenchantly explained in the Court of Appeal Sidebotham v. Holland is no authority for the proposition that in respect of a lease for a fixed term a notice served on one day can be treated as a notice served on the next. That disposed of this point. I turn therefore to the construction of the notices.
On reflection I have come to the conclusion that the question of the construction of the notices should be answered by holding that the notices were effective to determine the leases. I will first summarise my analysis of the problem before I explain why I feel unable to accept the attractively presented arguments of counsel for the landlord.
The reasons for my conclusion can be stated in the form of numbered propositions:
(1) This is not a case of a contractual right to determine which prescribes as an indispensable condition for its effective exercise that the notice must contain specific information. After providing for the form of the notice ("in writing"), its duration ("not less than six months") and service ("on the landlord or its solicitors"), the only words in clause 7(13) relevant to the content of the notice are the words "notice to expire on the third anniversary of the term commencement date determine this lease". Those words do not have any customary meaning in a technical sense. No terms of art are involved. And neither side has suggested that anything should be implied into the language. That is not surprising since the tests governing the implication of terms could not conceivably be satisfied. The language of clause 7(13) must be given its ordinary meaning. A notice simply expressed to determine the lease on third anniversary of the commencement date would therefore have been effective. The principle is that that is certain which the context renders certain: Sunrose Ltd. v. Gould  1 W.L.R. 20.