Kidney & McNamee v Charlton
| Jurisdiction | Ireland |
| Judgment Date | 22 January 2009 |
| Date | 22 January 2009 |
| Docket Number | [2008 No. 657 Sp.] |
| Court | High Court |
[2008 No. 657 Sp.]
THE HIGH COURT
Arbitration law - Landlord and Tenant law - Contract law - Master of the High Court - Rent review - Upwards only - Interpretation - Contractual terms - Fair deal - Public Policy - Appointment of arbitrator - Arbitration Acts 1954 -1998
Facts: The plaintiffs sought to apply for the appointment of an arbitrator to conduct a rent review in regard to commercial premises which the defendants held of the plaintiffs on foot of a lease. The thirty-five year lease contained rent review provisions every five years on the basis of an upward only clause. The defendant lessees refused in 2008 to concur to the appointment of an arbitrator to conduct a rent review. The defendants argued that the appointment of an arbitrator was premature and that the Court had to before the appointment of any arbitrator clarify the parameters of the task to be engaged in.
Held by the Master of the High Court that in times of recession an upwards only review clause entailed that usual comparators employed had to be disregarded. Rent review clauses had to be read closely and carefully considered. The most reasonable interpretation contended for had to be employed. There was a judicial willingness to infer terms to preserve the contractual essence. It was not necessary to rule on the assertion that the clause was ambiguous. The defendants had to make their case to the court assigned. Fair rents were a public policy objective and the goal of economic recovery was an important one.
Reporter: E.F.
DECISION OF THE MASTER OF THE HIGH_ COURT 22nd January, 2009
The plaintiffs' summons is their application to the court for the appointment of an arbitrator to conduct a rent review in regard to commercial premises in Dawson Street in Dublin which the defendants hold of the plaintiffs on foot of a lease of 30th October,
1986, between the predecessors in the title of both lessor and lessee. It is a straightforward thirty five year lease with rent reviews every five years on the basis of an upward only clause. The plaintiffs/lessors have exhibited a letter faxed to them by the defendants/lessees on the 27'' July, 2008 refusing to "concur" in the appointment of an arbitrator to conduct a rent review, and the summons issued on the l" August, 2008.
The defendants appear to be approaching the matter on the basis that the appointment of an arbitrator is premature, given that they are seeking rulings on a variety of contentions regarding the interpretation and legality of the upward review clause by which they appear to be bound and it is suggested that the court should, before appointing
any arbitrator, clarify the parameters of theL4skhe will be engaged to perform in due course.
When parties to a written contract fall out over the effect of a particular clause, a number of different scenarios may develop. The court will first determine, as a first order interpretative exercise, whether the clause, as signed up to, is clear and unambiguous. Occasionally, both parties agree that it should berectifiedto reflect their common understanding of the bargain. If one party contends for rectification along lines which the other cannot accept, the court must hear evidence to determine the intention of the parties or indeed, whether the parties were ever "ad idem",because if not, there may never have been the meeting of minds which is the basis of contract and the supposed contract may have to declared null and void. The contract may also fail if the term, though clear, is contrary to public policy. Alternatively, it may be possible to severthe offending clause from the main contract if it is not fundamental.
If the disputed clause is ambiguous a different set of options arises. The Court will have to embark on a second order interpretative exercise to see which of the various meanings represents the true intent of the parties. More often than not, this exercise is carried out without oral evidence in proceedings commenced by Construction summons, and the Court will look to the text of the agreement and apply a variety of presumptions as to meaning and intent. InMcCabe Builders (Dublin) Limited v. Sagamu Developments Ltd and anor. 23/11/2007 [2007] IEHC 391,Charleton J. firstly noting the Supreme Courts citation with approval of Lord Hoffman's dictum that:
"Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background
knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract,"
confirmed that:
"the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean"
and then added:
"The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mann ai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd . [1997] A. C. 749."
The leading English textbook onLandlord and Tenant Law(Woodfall, 4`b Ed para. 8.003A) notes that:
"An upwards only review may be one of two types. The clause may provide for the rent never to fall below the rent agreed at the start of the lease, but otherwise to fluctuate up or down according to changes in market value, or it may provide for the rent never to fall below that payable immediately before the review date. Clauses of the former type are sometimes called "threshold clauses " and clauses of the latter type are sometimes called "ratchet clauses."
It should be noted in passing that that use of comparators of the ratchet variety will contaminate and distort the data. A comparator based on an upward only review
clause of the ratchet type is not an open market, willing lessor willing lessee, rent though, in good times, the difference may be academic. In times of recession, however, such comparators must be disregarded.
The courts are of course always ready to rectify written terms of contract where they are satisfied that the parties did not intend the result recorded. In one case,Secretary of State for the Environment v. Associated Newspaper Holdings[1995]
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E.G.C. S. 166
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(C.A.), the court actually re-wrote the lease to specifically provide for upward only rent review, where that was the intention of the parties otherwise evidenced. Given that the particular contractual document - a lease - is a document of title whose terms may be treated as subject to re-interpretation on the basis of actual intention only as between the original parties, but on the basis of intentions inferred by law in disputes between subsequent assignees, the public meaning of the terms must be ascertained in much the same way as the court interprets Statute and other published deeds of record. The original parties to this lease are not before the court in this case, and one can say little more about their intention that they are presumed to have intended to be reasonable in their dealings and conform to the norm for a long-term lease of mutual benefit. This presumption is buttressed by the clear words of the...
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Ickendel Ltd v Bewleys Café Grafton Street Ltd
...the parties have done and cannot possibly follow any opinion of Honohan M. to the contrary in his decision in Kidney & McNamee v. Charlton [2009] MR 1. In that decision, it is to be noted that the sense of one authority has mistakenly been altered by the omission of the negative in the quot......