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GAZETTE
SEPTEMBER 1978,
only to the set of circumstances that arose therein and
were not intended to be extended in blanket form to all
and any option clauses with a time limit for their exercise
inserted). The dispute in the Stickney case concerned
contract for the sale of land in which time is not
necessarily of the essence as regards the date of
completion unless one party is guilty of unreasonable
delay and a notice is served limiting a reasonable time at
the end of which the contract will be treated as void or of
course unless the original contract contains a term
making time of the essence. The circumstances of that
case therefore were not analogous to the present one
under consideration and Russell J. made no qualifications
in expressing this view. The Court further was not dealing
there with the general question of what stipulations as to
time are to be regarded as the essence of the contract but
rather with a technical question as to the effect of Section
25 (7) of the Judicature Act 1873 which Section refers to
time stipulations in contracts in general, the Irish
equivalent of which is Section 28 (7) of the Judicature
(Ireland) Act 1877.
Returning to the Samuel case, the Court found it had
not jurisdiction to grant the Landlord relief in equity
owing to his mistake with regard to the time limit. Had
the result of the mistake been such as to involve, for
example, a forfeiture of the Lease or some similar
hardship the Court then may have had jurisdiction to
intervene but such jurisdiction did not extend to waiving
the terms of an option to allow the Landlord to improve
his financial position when he failed to comply with the
terms therein through his own lack of reasonable care. It
was held that the powers of the Landlord to serve due
notice to increase rent resembled an option and where the
Lessor had failed to comply with the condition precedent
to the exercise of the power, relief would only be granted
if by unconscionable conduct on the part of the Lessee the
Lessor had been led to believe that strict adherence to its
terms would not be insisted upon.
This case confirmed that a rent review provision in the
terms mentioned above was to be deemed an option the
exercise of which was subject to time being of the essence
and any purported exercise outside of the strict time limits
stipulated would render such exercise void. Therefore a
Lessor had to be most careful not to let the time stipulated
pass by even a day as this would preclude any review
until the next date allowed in the Lease which in the above
case was seven years later. It is not necessary to point out
the severe lack of revenue this might cause to a tardy
Landlord such being the position however in the United
Kingdom until 1977.
Fixing of New Rent Mandatory
As to the second type of rent review clause referred to
in which a Lease is granted for a fixed term with a rent
fixed for only a portion of that term, the rent to be
reviewed and agreed at the expiration of such part of the
term, we have seen previously that this is not deemed to
amount to an option to review for the simple reason that
there is not a rent fixed for the entire term and it is
mandatory therefore to fix a new rent at the expiration of
the first portion thereof. In this type of situation the
provisions as regards time for review will not necessarily
be deemed to be of the essence and should a Lessor fail to
review the rent at the time stipulated in the Lease the
Courts may grant him leave to do so notwithstanding
that the time has passed. All well drafted Leases in this
form should contain the word "shall" in the context that
in the proviso for review it should be provided that at the
stated intervals for review on the expiry of the portion of
the term for which a rent has been initially fixed it will be
provided that the Landlord "
shall*
follow a certain
machinery such as serving a Notice of Review at a
specified time as opposed to providing that he "may" do
so which could imply a discretion in the Landlord and
turn what might have been a mandatory provision into an
option, the important differentiation between which shall
be seen below and the results of such discretionary
working which can be seen in the case of
Mount
Charlotte Investments Limited
v.
Leek and Westboume
Building Society Limited (1976)
1 A.E.R. 890 which,
although overruled, shall be discussed later in this
context.
Prior to 1977 the leading case on this type of rent
review provision was that of
Kenilworth Industrial Sites
Limited v. E. C. Little & Company Limited
(1974) 2
A.E.R. and (1975) 1 A.E.R. 53 in which the Lessor
granted a Lease of a factory for twenty one years subject
to an annual rent of £2,980 for the first five years and
thereafter at a rent to be agreed in accordance with the
terms of the Lease. The Lease provided in clause 5 that
"not more than twelve months nor less than six months
before the expiration of the fifth, tenth and fifteenth years
of the term, the Landlord shall serve upon the Tenant a
notice to agree the rent of the said property for the next
five years" there was however a further provision that
"any failure to give or serve such notice shall not render
void the right of the Landlord to require the agreement or
determination of a new rent". The Landlord failed to
serve a notice within the time specified but served such
notice approximately three months after the time for
doing so. The Lessees contended that the further
provision referred to above was repugnant to the main
body of Clause 5 as regards the time limits allowed and
that the notice served therefore was of no effect. They
further contend that the provisions of Clause 5 were in
essence to be regarded in the nature of an option and that
a term should be implied in the Lease that if the Landlord
failed within the stated time to give the notice seeking
agreement of a new rent that the rent which was payable
in the preceding period should continue to be the rent
payable in the succeeding five years.
The Court of Appeal confirmed Megarry J.'s decision
at first instance that Clause 5 was one which provided the
Landlord with the machinery for the determination of the
rent and imposed on him an obligation to set that
machinery in motion by serving notice. The Clause
however did
not
confer on the Landlord an option to
require a review and therefore the requirement of strict
compliance with the condition precedent for operating the
review (i.e. the service of the notice within the time
stupulated) did not apply as it would be an option. It
would appear therefore that, even without the further
provision in the Lease which purported to exonerate the
Landlord from strict compliance with the time limits, that
time would not be deemed of the essence in these
circumstances. The Court held that there was no
repugnancy between the main body of Clause 5 and the
further provision and as the notice had been served within
a reasonable time before the first five year period had
expired that it operated as a valid notice to require the
review of rent. It was not contended by the Lessee that a
failure to comply with the time stipulations should
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