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Published online by Cambridge University Press: 02 January 2018
In leases it is not uncommon to make provision for periodic reviews of the rent and to impose on a lessor, who wishes to take advantage of such a provision, the necessity of his initiating, or ‘triggering’, the review by a notice served on the lessee at or before a certain date or within a certain period. In this article, we respectfully submit the House of Lords to have mistaken the nature of such impositions; and that it is because, and only because, of that mistake that the House has held such time limits to be, in the absence of the grossest indications to the contrary, merely ‘directory’ and so freely to be disregarded by lessors.
1. Because the form and substance of agreement together overcome the law – Co Litt 19a; cf Sale of Goods Act 1979, s 55(1), ‘Where a right, duty or liability would arise under a contract of sale of goods by implication of law [our emphasis] it may (subject to the Unfair Contracts Terms Act 1977) be negatived or varied by express agreement, or by the course of dealing between the parties, or by such usage as binds both parties to the contract.’
3. [1978] AC 904, HL(E). Outside England we know the case to have been followed in Wing Crawford Holdings v Lion Corpn [1989] 1 NZLR 562, HC and Raves v Fobone noted (1991) 65 ALJ 728 SC(NSW) and to have been approved in Collin & Coy Ltd v Karenlee Noms Pty Ltd (1983) 153 CLR 455 HC (Aust) at 468; Day v Mead [1987] 2 NZLR 443, CA at 451; Elders Pastoral v BNZ [1989] 2 NZLR 180, CA at 193 and Visionhire Ltd v Britel Fund Trustees Ltd 1991 SLT 883, IH at 888I–889E. We thank our colleague, Mrs Murdoch, for the references to the ALJ and the SLT.
4. Ibid, at 931B.
5. Ibid, at 932F.
6. Ibid, at 938A, 939B–C and 939G.
7. Cf Shaw v Jones-Ford (1877) 6 ChD 1, CA at 18 per Baggallay LJ; Smith v Crabtree (1877) 6 ChD 591 and Shaw v Ford (1877) 7 ChD 669.
8. However, as his Lordship pointed out [1978] AC at 94OC, even in such circumstances, but without the clearest undertaking by the lessor, a lessee could not sensibly insist (despite its attempt here so to do) that timeous compliance with provisions for the appointment of the valuer, which fell outside the control of the lessor, was a condition of the review.
9. Lords Diplock, Simon of Glaisdale, Salmon and Fraser of Tullybelton.
10. [1978] AC at 930E; cf Lord Simon at 940F, Lord Salmon at 951D and Lord Fraser at 962F.
11. [1962] AC 446, HL(E), 476 f, ie before, so that we need draw no comfort from, the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.
12. An argument drawn from inconvenience is of the greatest force in law – Co Litt 66a.
13. [1978] AC at 923G; cf Lord Salmon at 947E and Lord Fraser at 957B.
14. King's (Estate Agents) Ltd v Anderson [1992] 1 EGLR 121, ChD.
15. Mammoth Greeting Cards Ltd v Agra Ltd [1990] 2 EGLR 124, ChD.
16. In one case, the rule was described as a strong presumption: ‘it will not be rebutted by any contra-indication in the express terms unless it is a compelling one’–Phipps-Faire Ltd v Malbern Construction Ltd[1987] 1 EGLR 129, ChD at 131F. In Visionhire Ltd v Britel Fund Trustees Ltd 1991 SLT 347 at 353J, Lord Coulsfield in the Outer House of the Court of Session (but in contrast to the Inner House, n 3 above) declined to treat Burnley and Cheapside as having application in Scotland, because to do so would ‘override or give an artificial construction to express provisions agreed to by the parties.’ The Chancery Division recently rejected an argument that the doctrine that time was not of the essence did not alter the natural construction of a document - Pembroke St Georges Ltd v Cromwell Developments Ltd [1991] 2 EGLR 129 at 130H–K.
17. [1978] AC at 923C and 936G. The English cases cited in the three preceding notes and by Lord Coulsfield in Visionhire Ltd v Britel Fund Trustees Ltd, n 16 above, are enough to show how far from fulfilment, even 14 years from its utterance, is Lord Diplock's wish.
18. Co Litt Epil. Even if one prefers Holmes J, to Coke CJ, and maintains that ‘the life of the law has not been logic: it has been experience’, yet it does not follow that the law should not be logical - see the reference to Holmes J, in Paton, , A Textbook of Jurisprudence (4th edn by Paton and Derham, Oxford (1972) p 202nGoogle Scholar. It is respectfully submitted that the path taken by the House in Burnley and Cheapside is one leading to the ‘mystification’ of yet another part of English land law as condemned by Lord Wilberforce in Johnson v Agnew [1980] AC 367, HL(E) at 391A.
19. Romer J in Biggs v Hoddinott [1898] 2 Ch 307 at 313. His Lordship continued, ‘Undoubtedly, there are certain principles of equity, especially those relating to mortgagors and mortgagees, which have to a certain extent interfered with that general principle’ and with which, apart from the irrelevant unenforceability of a clog on the redemption, we deal below.
20. Philpots (Woking) Ltd v Surrey Conveyancers Ltd [1986] 1 EGLR 97, CA at 98H.
21. [1978] AC per Lord Diplock at 923C, Viscount Dilhorne at 938D, Lord Simon at 945C, Lord Salmon at 947E and Lord Fraser at 962F.
22. Ibid, per Lord Diplock at 9248; cf Viscount Dilhorne at 937A, Lord Simon at 9438, Lord Salmon at 949G and Lord Fraser at 957G.
23. Though we have some reservations about his examples, we respectfully agree with the proposition of Somers J in Elders Pastoral v BNZ, supra, n 3, ‘Neither law nor equity is now stifled by its origin and the fact that both are administered by the one court has inevitably meant that each has borrowed from the other in furthering the harmonious development of the law as a whole.’ We, however, respectfully dissent from the statement of Lord Fraser in Burnley and Cheapside [1978] AC at 957H, that the effect of the Supreme Court of Judicature Act ‘is quite different from the incorporation into the law of a colony of the law of England as it stood at some specified date– see for example Watts and Allorney-General for British Columbia v Watts [1908] AC 573, PC.’ For that case says nothing about the reception of common law and equity, but only about the reception of statute, into a Colony, in particular, of the Divorce and Matrimonial Causes Act 1857 into British Columbia. The classical theory was that the rules of the common law and equity never changed (save insofar as changes in the statutes replaced or modified them directly or, eg by altering public policy, indirectly), but were progressively discovered by the judges in their breasts as the occurrence of new circumstances made their further disclosure necessary. If, apart from such parenthetical changes, colonial courts departed from English decisions, it was on the basis that the English courts had erred in their declaration or interpretation of the common law or equity - see per Lord Hailsham LC in Broome v Cassell & Co [1972] AC 1027, HL(E) at 1067H.
25. Britain v Rossiter (1879) 11 QBD 123, CA at 129 per Brett LJ; Stimson v Gray [1929] 1 Ch 629 at 643 ff.
24. Ashburner, , Principles of Equity (1st edn, ca (1903) p 23 Google Scholar; repeated in the 2nd edn (by Browne, London 1933) on p 18, which continues, ‘The distinction between legal and equitable claims – between legal and equitable defences – and between legal and equitable remedies – has not been broken down in any respect by recent legislation.’.
26. [1978] AC at 945B.
27. As is implied by Lord Hailsham in Woodhouse Ltd v Nigerian Product Ltd [1972] AC 741, HL(E) at 757G–758C; cf 16 Halsbury's Laws of England (4th edn reissue, London 1992) 1071 n2.
28. Hence one of the cases cited by Denning J, in Foot Clinics ((1943) Ltd v Coopers Gowns Ltd [1947] KB 506 at 510 as illustrating the same principle as he applied in Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 was Panoutsos v Raymond Hadley Corpn [1917] 2 KB 473, CA, which concerned the sale of goods, a field whence the general principles of equity have been excluded: Sale of Goods Act 1979, s 62(2), contrast Partnership Act 1890, s 46; Riddiford v Warren (1901) 20 NZLR 572, CA; Watt v Westhoven [1933] VLR 458 in Banc; and Re Wait [1927] 1 Ch 606, CA at 635–6 per Atkin LJ.
29. [1978] AC per Lord Diplock at 925C–E, Viscount Dilhorne at 937B, Lord Simon at 943G–944A, Lord Salmon at 949G–H and Lord Fraser at 957C–F. In Day v Mead, supra, n 3, Cooke, P cites the award of damages in an action for breach of confidence in Dowson & Mason v Potter [1986] 2 All ER 418, CA as a further demonstration of the fusion. But as Somers J points out in Day v Mead at 461, ‘Courts of Equity must always have had the power to compensate by awards of money’; and he cites inter alia Todd v Gee (1810) 17 Ves 273 at 278 per Lord Eldon LC.
30. See now the Supreme Court Act 1981, s 49(1), ‘Subject to the provisions of this or any other Act every court exercising jurisdiction in England or Wales in any civil cause or matter shall continue to administer law and equity on the basis that, wherever there is any conflict or variance between the rules of equity and the rules of the common law with reference to the same matter, the rules of equity shall prevail.’ The continued distinct existence of each of law and equity is also necessarily implied in the Law of Property Act 1925, s 41, transcribed in n 31 below.
31. [1981] AC 1050, HL(E) at 1082H, he having first quoted the modern form of s 25(7) of the Supreme Court of Judicature Act 1873, to wit, the Law of Property Act 1925, s 41, ‘Stipulations in a contract, as to time or otherwise, which according to rules of equity are not deemed to be or to have become of the essence of the contract, are also construed and have effect at law in accordance with the same rules.’.
32. ‘Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treat the contract as repudiated, or a warranty, the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract…’ Section 10 of the same Act reads, ‘(1) Unless a different intention appears from the contract, stipulations as to time of payment are not of the essence of a contract of sale. (2) Whether any other stipulation as to time is or is not of the essence of the contract depends on the terms of the contract.’ This does not correspond with s 41 of the Law of Property Act 1925: it merely reflects that, despite what may be the first impression created by s 28 of the 1979 Act, which reads, ‘Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions …’, not all stipulations as to time were at law regarded as of the essence. In our respectful submission, the treatment in the Burnley and Cheapside cases, by Lord Diplock at 9258 and Lord Simon at 941B, of Martindale v Smith (1841) 1 QB 389, which involved the sale of specific goods on credit, is quite misleading. Rescission forbreach is not ab initio but de futuro – Johnson v Agnew [1980] AC 367, HL(E) at 393B per Lord Wilberforce. Thus, if the contract in Martindale had been rescinded, the buyer, under what is now s 18, r 1 of the Sale of Goods Act 1979, would have been left with the property in the goods, but without any obligation to pay for them, an absurd conclusion, of which the common law had never been guilty. The case therefore affords no evidence of any ‘growing tendency’ or lessening rigidity whatever.
33. The attempts were made in [1981] AC by Viscount Dilhorne at 1077H, by Lord Edmund-Davies at 1085D and Lord Fraser at 1982H.
34. Suisse Atlantique d'Armement Maritime SA v NV Rotterdamche Kolen Centrale [1967] 1 AC 361, HL(E) at 398D; and because, as was said by Simon P (as he then was), in Howard v Howard [1962] 2 All ER 539, PDA Div at 544E, ‘Nor, in principle, is there any reason for so restricting the doctrine of condonation. It is not as if the concept were even limited to matrimonial law. For example, a master who, with full knowledge of a servant's misconduct, elects to continue him in his service cannot subsequently dismiss him for the offences which he has condoned. The rule is, indeed, an application of the fundamental principle that one may not at the same time approbate and reprobate, or in the more homely expression blow hot and cold.’.
35. [1978] AC at 934A per Lord Diplock; perhaps at 946E per Lord Simon; and at 962E per Lord Fraser.
36. Eg Behzadi v Shaftesbury Hotels Ltd [1991] 2 All ER 477, CA.
37. [1978] AC at 927E.
38. Ibid, at 941F–942A.
39. Ibid, at 962D.
40. Gill v Lewis [1956] 2 QB 1 CA 13f per Jenkins LJ; Belgravia Insurance Co Ltd v Meah [1964] 1 QB 436, CA 444f per Lord Denning MR, as put by Chitty J in Dibbins v Dibbins [1896] 2 Ch 348 at 350, the doctrine of equity that time is not of the essence of the contract ‘is not one of universal application’. It is invoked only in certain cases, notably where equity could, ‘without injustice to the contracting parties, [decree] specific performance’, and ‘this maxim never had any application to cases in which the stipulation as to time could not be disregarded without injustice to the parties’–per Lord Parker of waddington in Stickney v Keeble [1915] AC 386, HL(E) 415 f.
41. See n 76 below.
42. Hence (as Lord Simon himself admits [1978] AC at 941G–H) ‘equity looks to the intent not to the form’ to see if the transaction is only what it purports to be - a sale of property with the bonus of a collateral option to re-purchase - in which case there would no no relief, or is in reality a pledge of property to secure a loan, subject to the pain of forfeiture, when relief may be available.
43. Ibid, at 929H–930A per Lord Diplock and per Lord Salmon at 949A–B, whose statement, that ‘this is hardly a serious disadvantage for rents have steadily increased over a very long period and show no signs of ceasing to do so’, could have been uttered only by a mere common lawyer. Insistence, that a trustee lend no more than two thirds of a valuation, ably and independently made, of land and then only if the loan be secured on a first mortgage - Shaw v Cates [1909] 1 Ch 389 at 396f and 397f per Parker J; Macleod v Annesley (1853) 16 Beav 600 at 605f per Romilly MR - reflects centuries of experience with fluctuations in the value of land, such as we are undergoing now; and with depreciation in the capital value of land falls also, though not necessarily immediately nor proportionately, the market rent. If the rent review allowed the rent as well to fall as to rise, the arguments in the following text to the end of the next paragraph would not apply; but this would not affect those in the text following n 51 below.
44. In construing a rent review clause, which is subject to the operation of a ‘trigger’, as a variety of option we are again following Viscount Dilhorne, [1978] AC at 939C–D.
45. Heron Garage Properties v Moss [1974] 1 WLR 148, ChD, unless they were to fall within the operation of some doctrine, such as relief against forfeiture, which they do not.
46. [1978] AC at 938B–D.
47. Ibid, at 948D–E.
48. Ibid, at 958E.
49. [1892] 3 Ch 359, CA, distinguished in Heron Garage Properties v Moss, n 45 above. See further the text at and n 72 itself, below.
50. From 27 Halsbury's Laws of England (4th edn, London, (1981) 275 and the cases there cited we understand at common law a yearly tenant not to be liable for permissive waste and, though he be obliged to use the property in a tenant like manner, this obligation is no more than to abstain from inconsistent acts - Marsden v Edward Heyes Ltd [1927] 2 KB 1, CA at 8 per Atkin LJ so that there is no obligation on the tenant to use the property at all and possession is thus a condition of the contract solely for the benefit of the tenant.
51. [1978] AC at 930D.
54. As is mentioned in the Visionhire case, n 3 above, at 888E–F per the Lord President.
53. At n 19, which it is not, so that the courts may not relieve against bad bargains in the absence of the exercise of undue influence - National Westminster Bank v Morgan [1985] 1 All ER 821, HL(E). If the parties to a lease wish to avoid the possibility that the carelessness of the landlord might cost him a review, they may readily adopt a form of words to that effect.
54. [1978] AC at 929C–G.
55. Ibid, at 962B.
56. Ibid, at 930B–E.
57. Ibid, at 945F.
58. Parkin v Thorold (1852) 16 Beav 59 at 66 per Romilly MR; see further n 42 above.
59. Pace Lord Fraser [1978] AC at 962B.
60. See the discussion of Raineri v Miles, n 31 above, in the text following that note.
61. Shaw v Foster (1872) LR 5, HL(E) 321 at 333, 338, 349 and 356 f.
64. Contrast Lock v Bell [1931] 1 Ch 35 where, in the sale of a public house, the subject matter was such as to compel equity to insist on strict compliance with the date fixed for completion; and Harold Wood Brick Co Ltd v Ferris [1935] 2 KB 198, CA 207f per Slesser LJ, Where in the sale of a brickmaking undertaking the subject matter led to the same conclusion.
63. ‘In the nature of things there must be a degree of good faith between the parties, not to turn round the contract upon frivolous objections’ - Seton v Slade (1802) 7 Ves Jun 265 at 274 per Lord Eldon LC; and so it would scarcely be realistic to hold the vendor to the time specified in the contract as the completion date.
64. Louinder v Leis (1982) 149 CLR 509, HC (Aust) at 514 per Gibbs CJ.
65. Ibid, at 513 fpcr eumdem..
66. Amherst v James Walker Goldsmith & Silversmith Ltd [1983] Ch 305, CA at 315E f per Oliver LJ.
67. In the text above at nn 35 and 36.
68. Keene v Biscoe (1878) 8 ChD 201; see also Leeds and Hanley Theatres of Varieties v Broadbent [1898] 1 Ch 343, CA at 349 per Lindley MR.
69. See Gatty v Maclaine 1921 SC, HL 1 at 6 per Lord Birkenhead LC, and 11 per Lord Shaw of Dunfermline.
70. Cromwell Property Investment Co Ltd v Western and Toovey [1934] Ch 322 at 333ff per Maugham J.
71. For the tenant gets nothing; whereas in the case of the mortgage the benefit is reciprocal: in return for the notice, enabling the mortgagee to rearrange his affairs, or the extra interest, which he gives to the mortgagee, the mortgagor is entitled to redeem otherwise than in strict accordance with the contract.
74. A point which, despite the disclaimer by certain Lords of Appeal referred to in nn 46–8 above, has been recognised judicially: Metrolands Investments Ltd v J.H. Dewhurst Ltd [1986] 3 All ER 659, CA at 669 a per Slade LJ; Weller v Akehurst [1981] 3 All ER 411, ChD at 416f–g per Fox J.
73. Barrow v Isaacs & Son [1891] 1 QB 417, CA; nor where a lessee of unregistered land took a lease without proper investigations as to the lessor's title - Imray v Oakshette [1897] 2 QB 218, CA.
74. Hare v Nicoll [1966] 2 QB 130, CA at 141Bper Willmer LJ.
75. Cf Lord Diplock in Burnley [1978] AC at 93OC.
76. De Medina v Polson (1815) Holt 47. This was precisely the result in a case where it was held that time had been made expressly of the essence in relation to the review procedure but where no rent was reserved throughout: ‘A liability to pay rent … must have been intended … it is wholly reasonable to suppose that … the old rent was to continue’–Weller v Akehurst, n 72 above, at 416e per Fox J.
77. Panavia Air Cargo v Southend-on-Sea BC [1988] 1 EGLR 111, ChD; King's (Estate Agents) Ltd v Anderson n 14 above.
78. See, eg in Philips v Mobil Oil Co Ltd [1989] 3 All ER 97at 101j f the Court of Appeal's refusal to overrule Beesley v Hallwood Estates Ltd [1960] 1 WLR 549 ChD, which had stood for almost 30 years; equally, the refusal of Lord Bridge of Harwich in Otter v Norman [1989] AC 129, HL(E) at 145H f to overturn Wilkes v Goodwin [1923] 2 KB 86.
79. [1966] 1 WLR at 1234F.
80. See above in n 11.
81. Note 79 above. As to the basis of our doubts about it, see Paterson, , The Law Lords (Toronto, 1982) pp 150–2CrossRefGoogle Scholar. One obvious fallacy is the suggestion on p 151 that one House of Parliament has the powers of the Queen in Parliament, which conflicts utterly with Stockdale v Hansard (1839) 9 Ad & E 1.