The Gazette 1981

GAZETTE

SEPTEMBER 1981

contract". Since the

Supreme Court ofJudicature Act (Ire.)

1877 the rules of equity prevail. Time could not normally be

considered to be of the essence in rent review clauses. They

were not options, but merely varied a term in the contract of

tenancy. No hardship would be caused by a failure to initiate

promptly a rent review.

When Time is of the Essence

(a) Principles

The Supreme Court accepted in

Hynes

Independent

Newspapers Ltd.

that time could be of the essence in rent

review clauses, although it was not normally so. O'Higgins

C.J. implicitly adopted the rule of law set out in the passage

from

Halsbury's

laws cited above, and Kenny J. accepted a

passage to similar effect from

Fry on Specific

Performance:

"Time is originally of the essence of the contract in the

view of a Court of Equity, whenever it appears to have

been part of the real intention of the parties that it

should be so, and not to have been inserted as a merely

formal part of the contract. As this intention may

either be separately expressed or may be implied from

the nature or structure of the contract, it follows that

time may be originally of the essence of a contract, as

to any one or more of its terms either by virtue of an

express condition in the contract itself making it so or

by reason of its being implied."

(b) Application of Principles

Express terms in the contract may make it clear whether

time is (or is not) of the essence. Where they do not, then it

may be implied from the subject matter of the contract

from the surrounding circumstances that time is of the

essence. The fact that the lease is of a commercial character

will not be sufficient, but it could make a difference ifthe rent

review is associated with other provisions. Both in the

Burnley

case and in

Hynes

Independent Newspapers,

was suggested, for instance, that the presence of a "break"

clause would be relevant. Under a clause of this kind, the

tenant is given the right to elect to determine prematurely by

surrender his interest in his property under the lease. This

has the converse characteristics of an option and, like an

option, there are practical business reasons for treating time

as of the essence. If a break clause and a rent review clause

are closely linked as, for instance, with the intention to give

the tenant a choice either to remain in possession at the

higher rent, or to determine the lease then, by necessary

implication, time would have to be of the essence in relation

to the rent review in order to allow the tenant to make this

choice.

In a recent case in England,

Al Saloom

Shirley James

Travel Service Ltd.

the Court of Appeal reached a similar

decision, as a matter of interpretation, where the two

provisions were found in a single continuous integrated

clause, even though the intention may not have been to

enable the tenant to break upon news of a rent increase, since

the periods specified were identical. Waller LJ. indicated

that

"The phrase must mean the same in each case, that

time was o^the essence in both or in neither. The

phrase would not change its meaning in the course of

10 lines unless there was some qualifying phrase to

make a change clear."

From what date is the new rent payable?

There are three possible dates from which the revised rent

could be payable. The first is the date on which the rent is

agreed or fixed; the second, the date on which the review

procedure was initiated; and the third, the date fixed by the

contract. Arguments in favour of the first two are,

respectively, that rent must in its nature be certain and that a

tenant ought to know in advance his maximum liability for

rent. The contractual date, however, was that upheld in both

the

Burnley

and

Hynes

cases. Rent, it was said, is what is

payable under the terms of the contract of tenancy. It need

not be certain in advance. Moreover, the tenant would have

a fair idea of his likely liability for rent, even where this had

not been fixed, since this could be estimated for him by an

experienced surveyor.

Where the tenant is prejudiced

Both in

Burnley

and

Hynes

it was emphasised that a tenant

would not normally be prejudiced by a delay in fixing a new

rent and this was a factor in their respective decisions.

Prejudice to the tenant would, however, be possible,

particularly if a delay were long. A number of resolutions to

this problem are possible.

(a)

Initiation of review by tenant

The lease may contain express provision permitting the

tenant to initiate a rent review, but even where it does not, he

can remind the landlord of the right to make a review. A

significant delay on the part of the landlord might then give

rise to an estoppel.

(b)

Service of notice by tenant

In a case where time is not of the essence, the tenant can

make it of the essence by serving a notice giving the landlord

a time limit within which to initiate a review (or take any

other steps necessary on his part). Provided that this period

is reasonable, he can thus make time of the essence. Lord

Diplock and Lord Fraser, in the

Burnley

case, both

suggested that such a notice could be served immediately the

date stipulated by the contract had passed.

Presumably,

even where there is no time limit in the contract, this method

could be adopted.

(c)

Damages

Where a tenant suffers loss (or other damage) by a failure to

review on time, then, if the landlord is in breach of contract,

he could be held liable in damages.

The fact that time is not

of the essence does not make it any the less a breach of

contract to fail to observe time in the contract, nor does there

necessarily have to be an obligation to review on the part of

the landlord.

(d)

Estoppel

On equitable principles, where a person so conducts himself

as to lead another to act to his detriment, then he may be

prevented from acting inconsistently with the belief he has

induced. A long delay in instituting a rent review could be

seen as an implied representation that no increase would be

sought, so that the landlord would be estopped from

claiming a review of the rent. As Lord Salmon said in the

Burnley

case," "any unreasonable delay caused by the

landlords and which is to the tenants' prejudice would

prevent the rent being revised after the review date".

O'Higgins C.J. in

Hynes

accepted "That there may be

circumstances in which delay has been extreme or where,

because of it, other factors have arisen which alter the

equities". Clearly, a short delay would not entitle the tenant

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