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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Avocet Industrial Estates LLP v Merol Ltd & Anor  EWHC 3422 (Ch) (19 December 2011)
Cite as:  EWHC 3422 (Ch)
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BRISTOL DISTRICT REGISTRY
2 Redcliff Street, Bristol, BS1 6GR
B e f o r e :
| AVOCET INDUSTRIAL ESTATES LLP
|- and -
|(1) MEROL LIMITED
(2) TUDOR ROSE INTERNATIONAL LIMITED
Mr Paul Letman (instructed by Joelson Wilson ) for the Defendants
Hearing dates: 6th and 7th December 2011
Crown Copyright ©
Mr Justice Morgan:
"interest at the base lending rate from time to time of National Westminster Bank plc, or if that base lending rate stops being used or published than at a comparable commercial rate reasonably determined by the Landlord".
"The payments shall if required by the Landlord be made by banker's standing order."
"14.1 If any Annual Rent or any other money payable under this Lease has not been paid by the date it is due, whether it has been formally demanded or not, the Tenant shall pay the Landlord interest at the Default Interest Rate (both before and after any judgment) on that amount for the period from the due date to and including the date of payment.
14.2 If the Landlord does not demand or accept any Annual Rent or other money due or tendered under this Lease because the Landlord reasonably believes that the Tenant is in breach of any of the tenant covenants in this Lease, then the Tenant shall, when that amount is accepted by the Landlord, also pay interest at the Interest Rate on the amount for the period from the date the amount (or each part of it) became due until the date it is accepted by the Landlord."
The break clause
"45.4 A Break Notice shall be of no effect if:
45.4.4 at the Break Date any payment under this lease due to have been paid on or before that date, has not been paid, or
45.4.6 at the Break Date there is a subsisting material breach of any of the tenant covenants of this lease relating to the state of repair and condition of the Property, or
45.4.7 at the Break Date the Tenant has not paid to the Landlord a sum equal to 6 months Annual Rent"
The rent deposit deed
"No such payment may be made if there is at that date any default by the Tenant … "
The break notice
Events between 11th August 2009 and 17th March 2010
"We are not in breach of any of the pre-conditions set out in clause 45 of the Lease."
The letter then went on to elaborate that statement by referring to clause 45.4.6 and then to clause 45.4.4. In relation to clause 45.4.6, the letter explained in detail why that provision was satisfied. The letter enclosed a number of photographs of the property taken on 16th March 2010. In a later part of the letter, there were further matters put forward as to the condition of the property and as to clause 45.4.4.
"We are not aware of there being any payments which are due to have been made under the Lease on or before the Break Date and which have not been paid."
The letter then referred to the statements made on this topic in the letter of 11th August 2009 and repeated that the tenant had not received any notice from the landlord of an intention to withdraw any sum from the deposit account on account of any breach by the tenant. Finally, the letter stated:
"We re-iterate that we are entitled to exercise our right to Break and to bring the Lease to an end in this way. We further re-iterate that we believe that there are no outstanding sums due to you under the Lease, and we look forward to promptly receiving the return of … our Rent Deposit monies in accordance with the terms of the Rent Deposit Deed and a refund of the other sums referred to in this letter."
The challenge to the Break Notice
"Clause 45.4.4 requires that all payments under the Lease due to be paid must have been paid at the Break Date. You have persistently paid rent and other sums due under the Lease late, significantly so in many cases, and Default Interest was and is clearly payable under clause 14.1 at 4% above NatWest base rate. You have been reminded of this previously and refused to pay interest (dismissing it as "silly"), a position we did not, and do not now, accept bearing in mind the clear terms of the Lease. This default alone is sufficient to invalidate the Break Notice, regardless of the amounts involved. Liability for Default Interest also relates back to all non-time-barred amounts which would in this case be as long ago as the grant of the Lease itself on 17 March 2005. "
The first challenge
(1) was there an implied agreement between the parties that the tender of a cheque for the 6 month payment, not being the tender of currency, would nonetheless constitute payment for the purposes of clause 45.4.7, subject to the cheque being cleared on presentation?
(2) if there were no such implied agreement, did the landlord accept the cheque as payment for the purposes of clause 45.4.7, subject to the cheque being cleared on presentation?
(3) if there were no such implied agreement and no acceptance of the cheque as payment, is the landlord estopped from contending that the tender of the cheque on 16th March 2010 was not payment for the purposes of clause 45.4.7, subject to the cheque being cleared on presentation?
The second challenge
(1) was the tenant liable to pay Default Interest calculated in accordance with clause 14 of the lease, even without the landlord having demanded payment of a sum by way of Default Interest?
(2) if the tenant was liable to pay Default Interest calculated in accordance with clause 14 of the lease, even without the landlord having demanded payment of a sum by way of Default Interest, was the tenant's failure to pay the same a failure within clause 45.4.4 of the lease?
(3) if the tenant was liable to pay Default Interest calculated in accordance with clause 14 of the lease even without the landlord having demanded payment of a sum by way of Default Interest, and if the tenant's failure to pay was within clause 45.4.4, was the landlord estopped so that it could not rely on clause 45.4.4 in relation to such non-payment?
Payment for the purposes of clause 45.4.7
"In many situations an inference could be drawn that payment could be made by cheque."
"On general principles, the landlord should have the rent in cash in his hands by the due date. This requirement may, however, be waived by express arrangement, or by necessary implication where the facts are sufficiently strong to establish that the landlord has shown that he is content to accept payment by cheque posted by the due date of payment. Inferences of this nature are not to be too readily drawn, but, where the facts support them clearly and emphatically, they are not to be dismissed."
"Where … a creditor expressly or impliedly authorises his debtor to transmit the amount of the debt by cheque through the post, the debtor is discharged if he complies with the authority by sending the cheque in a letter properly addressed to the creditor, even though it does not reach him. The necessary authority is not to be implied from the mere fact that the previous course of dealing between the parties has been to send cheques by post, though very little evidence of authority is required in addition to evidence of such a course of dealing." [emphasis added]
The course of dealing as regards payment by cheque
"Can you please settle all outstanding invoices a.s.a.p. or we will be charging interest on the overdue amounts.
Rather than me always chase (sic) you for money and make myself even more unpopular, can we please set up a standing order so we get paid on time
Your earliest attention would be appreciated.
Was there an implied agreement to accept payment by cheque?
Did the landlord accept the cheque?
"It is much more convenient to the mercantile world, that a tender in paper, if not objected to at the time, should be considered valid."
"I refer to those older cases because, in my view, they indicate that it is relatively easy for a person to accept a mode of performance which is not strictly that which the contract requires. If the person concerned accepts that mode of performance, it is not then open to that person thereafter to make an objection."
The other point of interest in Homes v Smith concerns the approach taken by the court to the question whether the payee in that case had accepted the cheque. Payment had to be made by 2 pm on a particular day. The cheque was delivered to the payee's solicitors between 11 am and 12 noon on that day. From the recital of the facts in the judgment, it seems that the payee and his solicitors did not do anything with the cheque before 2 pm that day. Further, the payer had reason to know that the payee's solicitor was not dealing with the matter as he had other commitments. It seems that the payee only negotiated the cheque some time after 2 pm on that day. Nonetheless, the Court of Appeal held that the payee had accepted the cheque and therefore the cheque amounted to payment and in accordance with established authority (Felix Hadley & Co v Hadley  2 Ch 680 and Marreco v Richardson  2 KB 584) payment was made upon the receipt of the cheque by the payee.
Any estoppel in relation to the payment by cheque
The construction of clause 14.1
The construction of clause 45.4.4
Any estoppel in relation to non-payment of Default Interest or clause 45.4.4
(1) the tenant believed on the 11th August 2009 and on 16th March 2010 that it did not owe the landlord any sums under the lease;
(2) that general belief must have included a belief that the tenant did not owe Default Interest;
(3) the landlord knew of the tenant's belief because the tenant had expressed that belief in its letters of 11th August 2009 and 16th March 2010;
(4) the landlord did not correct the tenant's belief as expressed in those letters;
(5) in particular, the landlord did not demand Default Interest; and
(6) if the landlord had demanded Default Interest, then the tenant would have paid the sum demanded to avoid any argument over the operation of the break clause.
"… persuasive authority for the proposition that the duty necessary to found an estoppel by silence or acquiescence arises where a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly to bring the true facts to the attention of the other party known by him to be under a mistake as to their respective rights and obligations."
Bingham J then considered the facts and said at page 158:
"The relationship of owner and charterer is not one of the utmost good faith. One must be careful not to impute unrealistically onerous obligations to those who may choose to conduct their relations in a tough and uncompromising way. There is nonetheless a duty not to conduct oneself in such a way as to mislead. I have no doubt that the owners knew that the charterers believed that they had paid the right amount. It was their duty, acting honestly and responsibly, to disclose their own view as to the charterers. They did not do so and indeed thwarted the charterers' attempts to discover their views. Their omission to disclose their own calculation led the charterers to think, until a very late stage, that no objection was taken to the calculation. It would in my view be unjust in the circumstances if the owners could rely on the incorrectness of a deduction which they had every opportunity to point out at an earlier stage and which their failure to point out caused the charterers to overlook."
"… in a case of mere passivity, it is readily intelligible that there must be shown a duty to speak, protest or interfere which cannot normally arise in the absence of knowledge or at least a suspicion of the true position."
The judge later applied that approach to the facts of that case: see at 155H.
The overall result
(1) the landlord is not able to rely on clause 45.4.7 to invalidate the Break Notice;
(2) at the Break Date of 17th March 2010, the tenant did owe Default Interest under the lease and as a result fell foul of clause 45.4.4 of the lease; and
(3) the landlord is not estopped from relying on clause 45.4.4 to defeat the tenant's attempt to operate clause 45.