The claimant appealed against rejection of its claim for specific performance of agreements by the defendant to take underleases of factory space. The landlord’s consent was needed, both to the grant of the underleases to Arista and also to an assignment to Arista of the headlease. Akzo was to use all reasonable endeavours to procure the consents. Arista went into possession under a licence, and so stayed for eight years. Although it made efforts to do so, Akzo was unable to obtain the Consents or an assignment to itself of the headlease until 13 December 2007. Arista had served notice on Akzo to terminate the agreement by a notice 30 October 2008 pursuant to paragraph 11: ‘If by [31 December 1999] all Property Consents shall not have been obtained in respect of any Business Property then either the Seller or the Purchaser may, by three months notice in writing to the other, terminate on the date of expiry of that notice, the obligations of the parties hereto in respect of that Business Property . . (but without prejudice to antecedent breach) in which event the Purchaser shall vacate the Business Property in question by the end of such notice period.’
Held: The court observed the absence of a dispute that Arista was entitled to serve the notice on Akzo on 30 October 2008. Mummery LJ said of the notice: ‘It was not a notice to complete the parties’ transaction by giving Akzo a last chance and by setting a deadline for it to take a transfer of the lease and to obtain the Property Consents. It was a notice to terminate the parties’ contractual obligations, a provision which enabled either party to escape from obligations in relation to the Premises. Such a notice could be served by either party if Akzo had not obtained the Property Consents by the stipulated date. The obligations which could be terminated included Arista’s obligation to pay a fee for its licence to occupy the Premises. One would not normally or reasonably expect that, in the absence of express provisions in the [agreement] or fresh agreement between the parties, a notice terminating the parties’ obligations, once given, could be unilaterally revoked or reversed or that, as [counsel for Akzo] strongly contends it has no legal effect on the parties’ obligations before the notice has expired. In my view, the immediate effect of the notice was that there was no longer any obligation on Akzo to use reasonable endeavours to obtain Property Consents or an assignment of the lease, or on Arista to take underleases of the Premises.’
Mummery LJ continued: ‘It is common ground that the notice provision must be construed as a whole, in its context and in its ordinary and natural meaning. As I read paragraph 11 the parties clearly agreed that, if the Property Consents had not been obtained by 12 months after the date of the [agreement], they were entitled to serve notice in writing terminating the parties’ obligations in respect of the Premises. Arista’s obligations included the obligation to take the underleases, as well as its obligation to pay the fee under the Licence Agreement. On service of the notice the position of the parties was that Arista would have to vacate the Premises by the end of the notice period and it would cease to be under an obligation to pay the licence fee, or to be under an obligation to take the underleases of the Premises. The language of the paragraph does not allow Akzo to reverse or vary that position on Arista’s obligations, such as by obtaining the Property Consents at any point down to the expiration of the notice. The obligation to take the underleases did not arise before the notice was given and the purpose of giving the notice was to prevent it from ever arising subsequently, given that Arista would be bound to vacate the Premises by the expiry of the notice period.’
Judges:
Mummery, Richards LJJ, Sir David Keene
Citations:
[2010] EWCA Civ 28
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – Irwin v Wilson and Others ChD 23-Feb-2011
The claimant sought a declaration that his contract for the sale of leasehold property to the defendants had been lawfully terminated by a letter from his solicitors. The defendants had moved in before completion, but the claimant found himself . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant
Updated: 13 August 2022; Ref: scu.396407
