Hynes Ltd v Independent Newspapers

• Jurisdiction: Ireland
• Judge: O'HIGGINS C.J.
• Judgment Date: 19 November 1980
• Neutral Citation: 1980 WJSC-SC 2432
• Court: Supreme Court
• Docket Number: (33/1980),[1979 No. 1354P.]
• Date: 19 November 1980

1980 WJSC-SC 2432

THE SUPREME COURT

O'Higgins C. J

Kenny J.

Parke J.

(33/1980)

HYNES v. INDEPENDENT NEWSPAPERS

HYNES LIMITED

v.

AFFIRMING HIGH 16.1.80.

INDEPENDENT NEWSPAPERS LIMITED

1 JUDGMENT delivered the 19th day of November 1980by O'HIGGINS C.J. (Parke J. agreeing)

2 This is an appeal by the Plaintiffs against the Judgment and Order of Mr. Justice McWilliam in the High Court dismissing their claim for a declaration that a Rent Review Notice served by the Defendants was ineffective as being out of time. The action was heard by Mr. Justice McWilliam, without oral evidence, but having regard to the provisions of a lease, dated the 29th March 1970, and, made between Sisk Properties Limited and the Plaintiffs, under which the Plaintiffs held certain premises in Galway from the Defendants (the successors of Sisk Properties Limited), and, to certain facts which were urged in the pleadings and admitted. These facts can be set out shortly and succinctly - the issue which arises thereon cannot, however, be so easily disposed of.

3 On the 29th March 1972 Sisk Properties Limited, thepredecessors in title of the Defendants, entered into an indenture of lease with the Plaintiffs under which they demised to the Plaintiffs premises in St. Augustine Street and Merchant's Road, Galway, for a term of 99 years commencing on the 1st January 1972. The rent reserved was the yearly rent of £42,000 but provision was made for a rent review in the seventh year and at seven-year intervals thereafter. This provision was made in par. D of the Lease in the following terms:

"The Lessors shall be entitled at any time before the 1st day of October in the seventh year of the term hereby created, and in every seventh year thereafter during the said term, to serve notice (hereinafter called a Revised Rent Notice) on the Lessee requiring a review of the rent payable hereunder on specifying in such notice the sums which the Lessor claims should be the new rent to become payablehereunder..."

4 The paragraph went on to provide that if the Lessee wished to dispute the amount of the proposed new rent he should within six weeks of the service upon him of the Revised Rent Notice, serve upon the Lessor a Notice of Dispute and thereupon the amount of the new rent would be determined by arbitration in the manner provided. It was furtherprovidedas follows:

"But if no such Notice of Dispute is so served by the Lessee then the sums specified by the Lessor in such Revised Rent Notice shall become and be the yearly rent payable hereunder as from the seventh anniversary of the commencement of the term hereby created, and for the residue then unexpired of the term hereby granted, until varied by virtue of any further Revised Rent Notice that may be served by the Lessor pursuant to the provisions hereinbefore contained."

5 The reddendum in the Lease had earlier provided in the followingterms:

"Yielding and Paying therefor during the said term unto the Lessor the yearly rent of £42,000 and such increased rent as may from time to time be payable hereunder as hereinafterprovided...".

6 On the 17th November 1978 the Defendants as Lessors served on the Plaintiffs a Revised Rent Notice claiming an increased or new rent of£160,000 per year. While this Notice was served in the seventh year of the term created by the Lease it was so served some six weeks later than the date specified in par. D, namely, the 1st October. By letter dated the 14th December 1978 the Plaintiffs' solicitorsindicated on behalf of the Plaintiffs that the Notice was out of time and ineffective and also, as a precaution, gave Notice of Dispute. The Plaintiff then commenced these proceedings claiming a declaration that the Lessors' Notice was ineffective to require a rent review, and, having lost their claim in the High Court, have brought this appeal to this Court.

7 The Plaintiffs' claim raises the question whether in relation to the effectiveness of the Rent Review Notice provided for in par. D of the Lease, observance by the Lessors of the time limited for such service was or was not essential. In holding in the High Court that such observance was not essential, Mr. Justice McWilliam was guided by the view which he formed, there being no express stipulation making time of the essence, that neither the nature of the subject matter of the contract nor the surrounding circumstances showed that time should be of the essence. In applying this test he followed the recent decision of the House of Lords in United Scientific Holdings Limited v. Burnley Borough Council, Cheapside Land Development Company Limited V. Messels Service Company 1977 W.L.R. 806 (hereinafter referred to, for brevity, as the Burnley Case). The burden of the Plaintiffs' appeal to this Court is that Mr. Justice McWilliam was wrong in so doing and that this decision of the House of Lords in the Burnley Case ought not to be followed in our courts.

8 As this matter is of considerable importance both to practitioners and to those involved in the property market it is necessary to make a few general observations about rent review clauses. Having done so I propose to examine the manner in which the observance of time in such clauses was regarded, certainly in the English courts, prior to the decision in the Burnley Case. Following that I propose to consider the reasoning behind the Burnley Case and whether it is appropriate that this decision be followed in our courts.

9 Over the past two decades, in both the United Kingdom and Ireland, the prevalence of inflation in the property market has led to the introduction of some provision for rent review if the term being negotiated is for anysignificant number of years. Lessors, faced with constantly changing money and property values, have not been prepared to lease their property for a long period without providing for a periodic revision or adjustment of rent. Such rent review clauses vary in form and content. In some cases the rent review may be initiated only by the Lessor, in others it may be initiated by either the Lessor or the Lessee. In some cases also, a rent review clause may be associated with a "break clause" entitling a lessee, unwilling or unable to pay the increased rent, to surrender. In other cases the lease clearly contemplates periodic revisions of the rent and the lessee undertakes to pay the original rent and also any revised rent coming into operation during the term. Whatever form such clauses take, in general, they specify a procedure for the determination of the revised rent and a time-table for the taking of the necessary steps in that procedure which, when followed, leads to the declaration of the new rent not later than the review date. The question which has arisen in this case, whether a failure strictly to observe the time-table deprivesthe lessor of the review he seeks, has not previously arisen in our courts. However, as indicated, it has arisen in a number of reported cases in England, the latest of which has been the decision of the House of Lords in the Burnley Case. In order to consider whether this decision ought to be followed I find it necessary not only to examine the reasoning which led to it but also the basis upon which the earlier decisions, many of which it expressly overruled, were decided. It seems convenient, therefore, to consider the earlier decisions first.

10 In Samuels Properties (Developments) Limited v. Hayek 1972 1 W.L.R. 296 the Court of Appeal in England had held that where the words of the rent review clause import an option or privilege for the lessor to increase the rent which would otherwise be payable then any conditions as to time must be strictly observed and accordingly the time specified for the exercise of the option must be treated as inflexible and mandatory. In that case particular attention was paid to the reddendum in the Lease of which Russell L.J. said in his Judgment atp.1301:

"The language of the reddendum indicates that the basic rent is to remain unchanged throughout the term unless it be increased in compliance with those provisions. Clause 1 of the Fourth Schedule in terms confers an option on the Lessor to require rent review in the manner thereafter provided. The process thereafter laid down in Clause 2 uses the language of a condition precedent in requiring a notice in writing with an express time requirement."

11 Having considered, on the question of equitable relief, where the time requirement for the exercise of the option was not observed, Eatonv. Lyon 1798 3 Ves. Jun. 689, Harries v. Bryant (1927) 4Russ. 89, Reid v. Blagrave (1831) 9 L.J.O.S. Ch.245 and Barrow v. Isaacs & Son 1891 1 Q.B.417 and particular passages from the judgments therein, he said at 1302:

"I am not prepared to extend those comments to a case such as the present. They are relevant to a case where a failure to comply with a covenant obligation has exposed a person to the danger of forfeiture of a lease or other estate. I decline to extend them to a case such as the present, in which the party is given an option to improve his financial position if he chooses to take particular steps laid down."

12 And Edmond Davies L.J. in his judgment drew a similardistinction between equitable relief against forfeiture saying atp.1307:

"The circumstances in which relief against forfeiture is granted are widely different from those under present consideration. In the former a right of forfeiture is expressly reserved or implied by law in order to ensure the performance by the lessee of his obligations. And the Court will grant relief if terms can be imposed which will ensure due protection for the lessor. But the power of a lessor on due notice to increase rent involves, in effect, the making of a new contract between the parties, subject in the present case, to compliance by the lessor with a condition precedent. It resembles options and these are undoubtedly...