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GAZETTE
SEPTEMBER 1978,
exonerate him therefore from paying any rent for the
residue of the term (which could not be accepted as a
realistic interpretation) but it was put forward that failure
to comply with the time limits should limit the Lessee to
paying only the original rent reserved for the first portion
of the term i.e. £2,980 per annum. Megarry J. rejected
this argument however on the basis that this was not what
the Lease said and stated that the Lessee was having to
rely for this contention on such a term being implied in
the Lease. Such a term however would be quite contrary
to the mechanism laid down in Clause 5 and would have
to be a term implied if and only if the Landlord failed to
operate the Clause according to its tenor, which he did
albeit three months after the date fixed. Further, the
Court confirmed that a Clause of this type is not framed
in the terms of an option but rather as an obligation, (the
Landlord
"shall"
serve uon the Tenant . . . ) and as such
is a mandatory provision designed to fill a void that will
otherwise occur.
The Accuba Case
It is now necessary to turn to a case decided a year
later namely
Accuba Limited v. Allied Shoe Repairs
Limited
(1975) 3 A.E.R. 782 in which a similar type of
review Clause was contained in an under-Lease for a term
of fourteen years from the 25th March 1967. It provided
that for the first seven years the rent was to be £5,000 per
annum and for the rest of the term a rent was to be
determined under Clause 5 of the under-Lease. Clause 5
provided how the reviewed rent was to be calculated and
Clause 5 (2) stated that it would operate only (a) provided
the open market rental value of the premises be specified
by notice in writing by the Landlord to the Tenant at any
time before the expiration of six years after the
commencement of the term hereby granted or (b) as shall
within three months after such notice to be agreed
between the parties in writing in substitution for the said
sum or (c) it shall be determined at the election of the
tenant by counter notice in writing to the Landlord not
later than three months after the Landlord's said Notice
(time to be of the essence hereof) by an independent
surveyor in default of agreement.
The period of six years after the commencement of the
term expired on the 24th of March 1973 and owing to an
oversight the Landlord failed to serve notice until
September 1974 when by letter they specified a rent of
£1,500 per annum. The tenant considered this notice
ineffective and on coming before the Chancery Division it
was held by Goff J. that the provisions of the Lease did
not consitiute an agreement by the Tenant to pay the
original rental figure of £5,000 throughout the fourteen
year term in its entirety subject to the Landlord's option
to review but rather was an agreement to pay a specific
rent fot the first seven years and thereafter a rent to be
decided in accordance with Clause 5. Therefore the
provisions in Clause 5 were mere "machinery" and time
limits therein were not of the essence. Although
unreasonable delay on the part of the Landlord in putting
the machinery of Clause 5 into operation might have
precluded him from seeking a rent for the second half of
the term that was higher than the first reserved rent, in the
context of a seven year period the delay was not
unreasonable and the Landlord's notice therefore was
effective and valid. The Court referred to certain dicta in
the earlier case of C.
H. Bailey Limited v. Memorial
Enterprises Limited
(1974) 1 A.E.R. 1003 in which a
Clause with a similar effect as that in the present case was
inserted in the Lease under which the Landlord failed to
serve the requisite notice to review within the stipulated
time. Sir Eric Sach's judgment was referred to in which
the following passage was cited by Goff J. with approval:
"the objective of the Courts in cases relating to office
leases is naturally to determine the intended commercial
effect of the particular agreement reached between the
parties. In this respect a Lease is no less a contract
relating to the use of premises than an agreement in
relation to the supply of furniture for those premises. It
follows that in this class of case the Courts should if
possible avoid resort to any of the highly technical points
that stem from the intricacies of the ancient law of
Landlord and Tenant". Goff J. in the Accuba case said
that what that case really concerned was a pure question
of construction of the under-Lease and like Sir Eric Sachs
preferred to deal with the case on this basis where
possible. Goff J. further referred to Denning M.R. who in
the Bailey case had stated that delay might give rise to a
defence by way of equitable estoppel but to succeed a
Tenant would have to show that he has altered his
position. This can involve a heavy burden of proof on a
Tanant as he will generally not be prejudiced owing to the
fact that he has had the use of the money in the
intervening period between the date the rent ought to have
been increased and when such increase was actually made
effective and although it can be fixed retrospectively not
only has he had the use of the money but also has had the
benefits of interest thereon. In neither the Bailey case or
the Accuba case was there any evidence submitted on this
point as the Tenants had not been prejudiced in any way
by the delav.
The Mount Charlotte Case
The final authority to be reviewed before turning to the
recent House of Lords decision is that of
Mount Charlotte
Investments Limited
v.
Leek and Westbourne Building
Society Limited
(1976) 1 A.E.R. 890 in which the
relevant Clause did not refer to the time in which a notice
was to be served to review the rent but rather to the time
within which application was to be made to an arbitrator
for the purpose of fixing a rent. This case highlighted the
necessity for the use of mandatory language such as the
parties "shall" do such and such instead of a technical
discretionary "may" adopt a certain course, as the use of
the latter term can. and did in this case influence the Court
towards the view that what might have been an obligation
on the Landlord to fix a new rent, as in the Kennilworth
case, was more in the nature of an option owing to the
discretionary type of language used, to the obvious
detriment of the Landlord who was then bound strictly to
the time clauses as in all option cases. This case has since
been overruled by the House of Lords but is of importance
to practitioners in this country as we have no indication
as of yet which side of the fence the Irish Courts will take
in interpreting such Clauses. The facts of the case were
that the Landlords had granted a Lease to the Tenant for
a term of twenty one years from the 25th March, 1967.
Clause 1 (a) provided for a rent of £2,750 per annum for
the first eight years and Clause 1 (b) provided that
"during the next six years of the said term i.e. from 25th
March 1975 to 25th March 1981, the rent was to be
whichever of the two following yearly rents is the greater
that is to say (1) the rent of £2,750 per annum or (2) such
amount as may be agreed between the Landlord and
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