Bank of Ireland v Fitzmaurice

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Lardner
• Judgment Date: 01 January 1989
• Neutral Citation: 1988 WJSC-HC 1779
• Docket Number: No. 1763/1986
• Date: 01 January 1989

BANK OF IRELAND v. FITZMAURICE

BETWEEN

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

PLAINTIFFS

AND

GREGORY FITZMAURICE

DEFENDANT

1988 WJSC-HC 1779

No. 1763/1986

THE HIGH COURT

Synopsis:

LANDLORD AND TENANT

Lease

Rent - Review - Clause - Construction - Effect - Coercion - Contracting out of statutory provision - Prohibition - Estoppel - By Indenture of Lease dated 2/11/82 and made between the plaintiff bank and the defendant, the plaintiffs demised certain premises to the defendant for the term of 18 years from 1/6/81 subject to the payment of the annual rent of #12,600 thereby reserved and to the covenants on the part of the defendant and the conditions therein contained - Prior to the execution of that lease, the defendant held the premises under three leases which had been granted by a family company. During the currency of those three leases all matters affecting the lessor's interest had been dealt with by a particular member of the family when the defendant's interests as lessee were also involved - That particular member had negotiated the terms of the Lease of 1982 with the defendant and had continued to act as authorised agent of the lessor after the lessor's interest in the premises had been assured by the family company to the plaintiff bank - The rent reserved by the Lease of 1982 was payable quarterly in advance - Until 31/5/86 the defendant paid to the plaintiffs the rent reserved by the lease, as increased by the provisions thereof - The "plaintiffs claimed in the High Court payment by the defendant of the sum of #32,646 being the total of the increased rents allegedly payable by the defendant in respect of the two quarters commencing on 1/6 and 1/9/86 - The sum claimed as rent by the plaintiffs was calculated by them pursuant to the terms of a rent-review clause contained in the lease - That clause provided that the rent payable in respect of the two years ending on 31/5/88 should be the rent at the start of the last review period as increased in proportion to the increase that had occurred in the meantime in the "Cost of Living Index published by the Central Statistics Office in the Republic of Ireland" using an index figure based on the average monthly index figure published in each of the twelve preceding months, and as further increased by quadrupling the increased rent so obtained - The clause provided for further rent increases to be made in a similar manner in respect of future review periods - The lease contained a provision allowing the defendant to surrender his interest under the lease to the plaintiffs before the expiration of the said term of years - During the said negotiations, the defendant expressed to the member of the said family the defendant's concern about the onerous nature of such increase and quadrupling of the increase and the said member informed the defendant that such provisions would not be enforced against him - Section 16 of the Act of 1980 confers on the tenant of a tenement a right to a new tenancy in the tenement on the termination of his previous tenancy; the terms of the new tenancy are stated to be those which are agreed between the landlord and the tenant and, in default of such agreement, the terms of the new tenancy are to be fixed by the court - However, s. 17, sub-s. l(a)(iii), of the Act states that a tenant shall not be entitled to a new tenancy under s. 16 if the tenant has terminated the tenancy by notice of surrender or otherwise - Section 85 of the Act states:- "So much of any contract, whether made before or after the commencement of this Act, as provides that any provision of this Act shall not apply in relation to a person or that the application of any such provision shall be varied, modified or restricted in any way in relation to a person shall be void" - The defendant resisted the plaintiffs claim on the ground that the rent-review clause was inoperative since there had been no Cost of Living Index since the year 1953 when it was replaced by the Consumer Price Index, and since the latter index has never been produced or published on a monthly basis - Secondly, the defendant contended that the plaintiffs were estopped by the assurance, given to the defendant by the member of the family then owning the lessor company, that the rent- review clause permitting a quadrupling of an increased rent would not be enforced against the defendant. Thirdly, the defendant contended that such rent-review clause was designed to circumvent the provisions of the Act of 1980 by coercing the defendant, by the pressure of enormous rent increases, to surrender his interest under the lease and thereby forfeit his rights under that Act and that, accordingly, the rent-review clause was rendered void by the provisions of s. 85 of the Act - Held, in dismissing the plaintiffs" claim, held that the rent-review clause must be construed ~contra proferentem~ and could not be treated as referring to the Consumer Price Index, and that the clause was inoperative on the ground of the failure to provide the basis of the contemplated calculations - Held that the plaintiffs had allowed the member of the family who had owned the lessor's interests under the former leases to represent himself as the authorised agent of the plaintiffs and that they were bound by that member's assurance to the defendant - Held, accordingly, that the plaintiffs were estopped from enforcing the rent-review clause against the defendant - Held that the intended effect of the rent-review clause and the clause allowing the defendant to surrender the premises to the plaintiffs constituted a provision, within the meaning of s. 85 of the Act of 1980, in relation to the plaintiffs that the defendant's rights under the Act of 1980 should not apply - Held, accordingly, that the rent-review clause was rendered void by the said section - Landlord and Tenant (Amendment) Act, 1980, ss. 16, 17, 23, 85- (1986/1763 - Lardner J. - 28/7/88) 1989 ILRM 452

|Bank of Ireland v. FitzMaurice|

CONTRACT

Terms

Validity - Statute - Benefit - Exclusion - Statutory prohibition - Void rent-review clause in lease - ~See~ Landlord and Tenant, lease - (1986/1763 - Lardner J. - 28/7/88) 1989 ILRM 452

|Bank of Ireland v. FitzMaurice|

STATUTE

Benefit

Exclusion - Prohibition - Contract - Terms - Void rent- review clause in lease -~See~ Landlord and Tenant, lease - (1986/1763 - Lardner J. - 28/7/88) 1989 ILRM 452

|Bank of Ireland v. FitzMaurice|

1 Judgment of Mr. Justice Lardner delivered the 28th day of July 1988.

2 The Plaintiffs" claim in this Action is for £32,646.10 as the balance of two quarters rent due by the Defendant on the 1st of June 1986 and the 1st of September 1986 out of premises consisting of the ground, first, second and third floors of No. 9 and the ground floor of No. 10 Barron Strand Street in the City of Waterford under an Indenture of Lease dated the 2nd of November 1982 and made between the Plaintiffs and the Defendant. Numbers 9 and 10 Barron Strand Street were initially two of several properties in Barron Strand Street owned by Coads Limited, a Company carrying on the business of retail sale of shoes. Two brothers Messrs. Kenneth and Geoffrey Coad inherited this business and the share capital of the Company on the deaths of their father and their uncle. Shortly after this some of the properties previously used for the business by the Company were let on leases and Mr. Kenneth Coad withdrew from the business. Mr. Colin Chapman who was Solicitor to the Company and for Mr. Coad said that at the time of the lettings it was not clear whether the Company might not require later to recover possession of these premises but that in any case the Company wished to obtain rents which would be equivalent to the commercial return which might have been earned by using them in the shoe business.

3 In 1977 the Defendant, who was a schoolmaster and was minded to establish the business of a stationery and book shop, purchased from Pendulum Boutique their interest in the ground floor of No. 9 Barron Strand Street, taking an assignment of a lease dated the 13th of January 1977 and made between Coads Limited and Pendulum Limited for a term of 18 years from the 1st of January 1975. This lease provided for an initial rent of £2,048 per annum and for periodic increases of rent at successive periods of two years by a process of indexation and then multiplication. The lessees" consent to the assignment was negotiated by the Defendant with Mr. Kenneth Coad. In the Summer of 1978 the Defendant leased the first, second and third floors of No. 9 by lease dated the 1st of August 1978 made by Coads Limited. This lease was negotiated directly with Mr. Kenneth Coad and was for a term of 15 years from the 1st of January 1978 at an initial rent of £1,500 with provision for increase every two years by way of indexation and multiplication as in the Pendulum lease. Subsequently the Defendant acquired by assignment the lease of No. 10 Barron Strand Street, again obtaining the lessors" consent from Mr. Coad and also negotiating with him and obtaining their consent to the removal of a dividing wall between Nos. 9 and 10. This lease contained similar provisions to the other two leases with regard to rent reviews. In evidence the Defendant said that in each case he had read the clauses in the leases relating to the rent and understood them. In each lease it was provided that for the second and third periods of two years of the term the rent should be increased by reference to the "Consumer Price Index published by the Central Statistics Office ........." In respect of the fifth and sixth periods of two years provision was made for similar increases by reference to this index and then for the resultant figure to be multiplied by a multiplier of four.

4 At some date in the 1970's which has not been established by the evidence Mr. Kenneth Coad having executed a Deed of Settlement dated...