Property Litigation Newsletter – June 2010
More Break Notice misery for a Tenant?
It seems that litigation in relation to break notices is now the "in" thing. In Hexstone Holdings Limited v A H C Westlink Limited the Court looked at another seemingly obvious point in relation to whether a break notice had been effectively served.
The Facts
In this case, the Landlord sought a declaration that an Underlease to the Tenant had not been terminated. The Underlease gave the Tenant an option to terminate on a specified date by giving six months' notice in writing.
In due course the Tenant sent an announcement to the Landlord to confirm that it had merged with a group of companies and would be changing its name to that of its new parent company. As requested in the announcement the Landlord directed future rent invoices to the parent company, which were duly paid by them.
However, the name change did not occur and when notice was given under the break option, it was written on the parent company's notepaper and expressed to be for and on behalf of the parent company. The Landlord argued that the notice had not been given by the Tenant and was therefore invalid.
How would the Court view these facts?
The Court held that the notice had clearly been given by the parent company and was not expressed to be given by the parent company as agent for the Tenant.
The Court found that there was no evidence that the Tenant had made the decision to give the notice or authorised the parent company to act on its behalf. There was no evidence of express authority creating a general agency and there was no evidence to suggest that such an agency could be implied.
The mere payment of rent by the parent company coupled with occupation did not necessarily indicate that the payer had the Tenant's authority to terminate the legal estate.
Even if the parent company had been authorised to serve notice on the Tenant's behalf, the absence of reference to any agency within the notice itself meant that the Landlord could not have acted safely in the knowledge that the notice would be binding on the Tenant.
The change of name announcement did not alter the position because the notepaper on which the notice had been written gave the parent company's registration number, which was different from the Tenant's registration number contained in the Underlease. This clearly indicated that the entity giving the notice was not the original Tenant. Accordingly the notice was invalid and the Underlease continued.
Harsh?
Not really. It was a simple point that was overlooked. Although the Court will often try to find the "right" decision when faced with an issue such as this it had very little room for manoeuvre here. If the terms of the Lease are clear then simple mistakes can have dire consequences.
Rob Nicholson is a partner at Michelmores and Head of the Property Litigation Team. For further information on the issues raised in this article, please contact Rob at rob.nicholson@michelmores.com.
This information has been prepared by Michelmores LLP as a general guide only and does not constitute legal advice on any specific matter and should not be relied upon as such. We recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of this information.
