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Cite as: [1997] UKHL 19, [1997] 3 All ER 352, [1997] 2 WLR 945, [1997] 24 EG 122, [1997] CLC 1124, [1997] 1 EGLR 57, [1997] 25 EG 138, [1997] NPC 81, [1997] EG 82, [1997] AC 749, (1997) 16 Tr LR 432

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Mannai Investment Co Ltd v. Eagle Star Assurance [1997] UKHL 19; [1997] AC 749; [1997] 3 All ER 352; [1997] 2 WLR 945 (21st May, 1997)

HOUSE OF LORDS

  Lord Goff of Chieveley   Lord Jauncey of Tullichettle   Lord Steyn   Lord Hoffmann   Lord Clyde

OPINIONS OF THE LORDS OF APPEAL FOR JUDGEMENT IN THE CAUSE

MANNAI INVESTMENT COMPANY LIMITED

(APPELLANTS)


v.


EAGLE STAR LIFE ASSURANCE COMPANY LIMITED
(RESPONDENTS)

ON 21st May 1997



LORD GOFF OF CHIEVELEY


My Lords,

      This appeal is concerned with the question whether a notice given by a tenant pursuant to a break clause in a lease was an effective notice. In fact, there were two leases with identical break clauses, and two identical notices were given. For convenience, however, I will assume that there was only one.

      The premises were in Jermyn Street in London. The lease was dated 11 March 1992, and was for a term of 10 years from 13 January 1992. The respondent company was the landlord, and the appellant company was the tenant. The relevant clause was clause 7(13), which provided as follows:

So the clause gave the tenant a single opportunity to bring the lease to an end. It so happened that the market for rents in this area had fallen, and the tenant decided to take advantage of this opportunity. It served the following notice on the landlord:

Unfortunately, however, the tenant made a mistake. The third anniversary of the term commencement date was not 12 January 1995 but 13 January 1995. The landlord has claimed that in the result the notice was ineffective. The Court of Appeal, reversing the decision of Judge Rich Q.C. (sitting as an additional judge of the Chancery Division), upheld the landlord's contention. It is from that decision that the tenant now appeals to your Lordships' House.

      I should record at once that the judge held that the tenant was entitled to succeed on the basis that, because 12 and 13 January were contiguous dates, there was a moment of time at which they coincided; and from this it followed that a notice expressed to determine the lease on 12 January was effective to do so on 13 January as required by the clause. In so holding, he invoked the authority of Sidebotham v. Holland [1895] 1 Q.B. 378. But, as Nourse L.J. pointed out in the Court of Appeal in the present case [1995] 1 W.L.R. 1508, 1514-1515, that case provided no authority for the judge's conclusion. It was concerned with a notice to quit and deliver up possession by midnight. It related therefore to a notice to quit at a point of time which was held to be common to both dates, and not, as in the present case, a notice to take effect on a certain date. Here, a notice taking effect on a different, though contiguous date, could not be rendered effective on the basis of Sidebotham v. Holland. With that reasoning, I find myself in complete agreement. It follows that the central question in the appeal before your Lordships' House is whether the Court of Appeal was right to hold that the notice was in any event not an effective notice under the clause. To that question I now turn.

      At first sight it seems unreasonable that the notice should not have been effective. It was obvious that the tenant was trying to give an effective notice under the clause, and that it had mistakenly assumed that the anniversary of the term commencement date was not 13 January but 12 January 1995. As Hobhouse L.J. pointed out (see [1995] 1 W.L.R. 1508, 1516F), the tenant had mistakenly read the clause as if it said "to expire at the end of the third year of the term," when it did not do so. It is tempting therefore to assist the tenant who has made a mistake of this kind, when it must have been obvious to the landlord that the tenant intended to give an effective notice under the clause. But the difficulty in the way of adopting this approach is that, on the authorities, it is inconsistent with the agreement of the parties as expressed in the clause.

      An early authority in this line is Cadby v. Martinez (1840) 11 Ad. & EI. 720. In that case a tenant was entitled under a clause in his lease to determine it by notice expiring on Michaelmas day 1837. The tenant mistakenly gave notice to quit and deliver up the premises on 24 June 1837. The notice was expressed to be "agreeably to the covenants of the lease." It was held that notice was not effective to determine the lease. Lord Denman C.J. said, at p. 726:

      The reasoning in this brief judgment is clear and compelling. You start with the position that, under the lease, the tenant has covenanted to pay rent for the full term; but under a proviso in the lease the tenant may, by notice, rid himself of the obligation under that covenant. However, to be effective for that purpose, the notice must conform to the terms of the proviso. If on its true construction the notice does not do so, it will not be effective for its purpose, because the parties have agreed that only a notice conforming to the terms of the proviso will be effective. The fact that the landlord realises that the tenant intended to take advantage of his rights under the proviso, but has only failed through some mistake to give the required notice, is irrelevant. The simple fact is that the tenant has failed to use the right key which alone is capable of turning the lock.

      Nowadays, the leading case is Hankey v. Clavering [1942] 2 K.B. 326. The lease in question was for a term of 21 years from 25 December 1934. The break clause conferred on either party the right to determine the lease at the expiration of the first seven years, by six calendar months' notice. The landlord gave notice to the tenant's solicitors in the following terms:

      This was obviously a mistake on the part of the landlord, because the six months' notice should have expired on 25, not 21, December. At first instance, Asquith J. held that the notice could be saved on the basis that it had been accepted as a good notice by the tenant's solicitors; but that solution was rejected by the Court of Appeal on the facts. The Court of Appeal, which consisted of two distinguished and very experienced Chancery lawyers, Lord Greene M.R. and Lord Clauson, held that the notice was ineffective. They regarded the point as so clear that they gave judgment ex tempore. Indeed, Lord Clauson concluded his brief judgment as follows, at p. 331:

      Lord Greene M.R. introduced his judgment with the following passage, at p. 328:

      He expressed his reasoning and conclusion as follows, at pp. 329-330:

      The essential point made by Lord Greene M.R. therefore was that notices of this kind are documents of a technical nature because they are not consensual documents; but, if they are in proper form, i.e. if they comply with the specification in the clause, they have of their own force the effect of bringing the demise to an end. It is necessary, therefore, to turn to the lease to ascertain what is required. Here the landlord had to give six months' notice of his desire to determine the demise at the expiration of the first seven years, which in fact expired on 25 December 1941. This he failed to do; and accordingly the notice was not effective. The facts that he had obviously meant to give an effective notice at the end of the first seven years, that he had simply made a mistake about the date, and that this may have been obvious to the other party, made no difference. The simple position was that the notice he gave did not conform to the agreed specification in the clause which gave the right to determine the lease, and so was not effective for that purpose.

      It is, in my opinion, correct in principle that a notice under such a clause will only be effective if it conforms to the specification in the clause. The specification in the clause is contained in a document which has been agreed between the parties, and so prescribes the requirements with which the notice must comply if it is to achieve the desired effect. In the case before your Lordships, the notice must (1) be not less than six months notice, (2) be in writing, (3) be served on the landlord or its solicitors, (4) expire on the third anniversary of the term commencement date. It is plain that fulfilment of all four of these requirements is essential. It is with the fourth requirement that we are here concerned; and it is well established that this required that the notice should be so expressed as to expire on the relevant date. The position was made clear by another distinguished lawyer, Atkin L.J., in P. Phipps and Co. (Northampton and Towcester Breweries) Ltd. v. Rogers [1925] 1 K.B. 14, 27. He there cited Lord Coleridge C.J. as saying in Gardner v. Ingram (1889) 61 L.T. 729, 730, that: "Although no particular form need be followed, there must be plain, unambiguous words claiming to determine the existing tenancy at a certain time." Atkin L.J. continued: "The date of determination must be the right date."

      The principle is therefore clear. The agreement between the parties provides what notice has to be given to be effective to achieve the relevant result. The question in each case is: does the notice which was given, properly construed, comply with the agreed specification? If it does, it is effective for its purpose. If it does not, it is not so effective; and the mere fact that the person serving the notice plainly intended, and was trying, to give an effective notice under the clause, and that the recipient of the notice realised that he was doing so, makes no difference. This is because the notice, properly construed, did not comply with the agreement between the parties. The key does not fit the lock, and so the door will not open.

      I have been careful to use the expression "properly construed." This is because, although at first sight the notice given may not appear to comply with the agreed specification in the clause, nevertheless on examination it may transpire that, properly construed, it does in fact do so. This may occur where there is a latent ambiguity in the notice. A striking example is to be found in Doe d. Cox v. Roe (1803) 4 Esp. 185 (which was cited in argument in Cadby v. Martinez). There the landlord of a public house in Limehouse gave notice to quit "the premises which you hold of me . . . commonly called or known by the name of The Waterman's Arms." On the evidence, the only property let by the landlord to the tenant was a public house called The Bricklayer's Arms; moreover there was no public house in Limehouse called The Waterman's Arms. The notice was held effective in respect of the tenancy of The Bricklayer's Arms, the case being treated as one of latent ambiguity. Another example occurs when a date is specified in the notice which, as is plain from the face of the notice, was obviously stated in error for the true date which the giver of the notice must have intended to specify. This will usually occur nowadays through a simple typing error. In such a case, the date so given can properly be construed as a reference to the true date. An example of the application of this principle is to be found in Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442. In that case, which was (like the present) concerned with a break clause in a lease, the relevant date upon which a notice given by either party under the clause might take effect was a date in September 1975, but a notice given by the landlord in September 1974 specified a date in September 1973. It was plain from the face of the notice that a date in 1973, which had already passed, could not conceivably have been intended by him. It must have been a clerical error, and could properly be read as intended to refer to 1975. In these circumstances Goulding J., applying ordinary principles of construction, held the notice to be an effective notice to determine the lease on 27 September 1975. He said, at p. 446:

The decision of Goulding J. in that case was therefore made in accordance with the principles I have stated. I should however mention that, in the report of the case in [1976] 1 W.L.R. 442, 443G, it is stated that, although the date upon which a notice given by either party under the clause might take effect was 27 September 1975, the notice given by the landlord specified the date as 17 September 1973. Your lordships were however informed that comparison of this report with other reports of the case reveals that the date of determination specified in the landlord's notice was, in fact, 27 September, not 17 September, so that the only error in the landlord's notice consisted of specifying 1973 instead of 1975. I am satisfied that this must have been the case. If not, Goulding J. would certainly have addressed the question of the effect of the error as to the day of the month; and, if he had done so, he would, consistently with the reasoning in his judgment, have held that on that ground the notice was ineffective.

      It is however well settled that, under a clause such as the present which does not require that the date of expiry should be specified as such in the notice but merely that the notice should be expressed to expire on the relevant date, it is enough that the notice should be so expressed to expire in accordance with the terms of the clause. This was made clear by Lord Coleridge C.J. in Gardner v. Ingram, 61 L.T. 729, 730, in the passage I have already quoted. So if the tenant in the present case had given a notice expressed to determine the lease on the third anniversary of the commencement date, that would have been a sufficient compliance with the specification in the clause. Furthermore it is also well settled that, if the person giving the notice specifies the actual date but out of caution also specifies, in the alternative, the end of the period at which the notice is required under the clause to take effect, the alternative so given will be effective to save the notice if the actual date so given should prove to have been mistaken. For obvious reasons, therefore, it is a commonplace for notices to quit to take this form, which avoids the trap into which the tenant fell in the present case. The position was stated clearly by A.L. Smith L.J. in Sidebotham v. Holland [1895] 1 Q.B. 378, 389, a case to which I have already referred, when he said:

      That what I have said sets out the long established law on this subject appears clearly from the judgments of Lindley L.J. (with whom Lord Halsbury agreed) and A.L. Smith L.J. in that case. This was the established law which was applied by the Court of Appeal in Hankey v. Clavering [1942] 2 K.B. 326, and by the Court of Appeal in the present case. I wish to stress however that these principles have been evolved in the case of clauses in leases, such as notices under a break clause, options to purchase, and notices to quit, in which provision is regularly made as to the conditions to be fulfilled in respect of the relevant notice and, in particular, that the notice must be expressed so as to take effect on a certain date.

      Before your Lordships Mr. Cherryman Q.C. for the tenant, faced with the relevant authorities, sought in the present case to distinguish Hankey v. Clavering, which was the authority held by the Court of Appeal to be decisive against his client. He submitted that the date of determination specified by the tenant in its notice was not an essential part of the notice and must give way to the tenant's obvious intention, having regard to the express invocation by the tenant of clause 7(13), that the notice should have the effect of expiring on the third anniversary. But in my opinion that submission is contrary to the judgment of Lord Greene M.R. in Hankey v. Clavering itself. He treated it as necessary that the person giving the notice should claim to determine the tenancy at a certain time, and (as Atkin L.J. said in Phipps [1925] 1 K.B. 14, 27) that must be the right time. The fact that the tenant in the present case expressly identified the clause in question as opposed to implicitly referring to it (as in Hankey v. Clavering) cannot, as I see it, make any difference. If that were so, it would be enough for the person giving the notice simply to invoke the clause without specifying any time at which the notice should take effect. That would, however, be contrary to the construction which has for a long time been placed upon clauses of this kind.

      Mr. Cherryman next relied upon a test stated by Goulding J. in Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442, 444G, to be generally applicable, viz.: "Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?" These words have been fastened upon to suggest that a broader test should be applied than is recognised in the authorities, and have been cited in textbooks as having that effect. Indeed, in Micrografix v. Woking 8 Ltd. [1995] 2 E.G.L.R. 32 Jacob J. referred to Goulding J. as having "distinguished the celebrated, much distinguished, case of Hankey v. Clavering [1942] 2 K.B. 326" and stated, at p. 33, that "Carradine . . . is the modern approach. . ." I have to say, however, that this interpretation reveals a complete misunderstanding of Goulding J.'s judgment in Carradine which, read as a whole, demonstrates that he had no intention of departing from the law as established in the previous authorities, including Hankey v. Clavering, by which he was bound. In his judgment, Goulding J. quoted at length from the judgment of Lord Greene M.R. in that case, and said correctly, at p. 446:

      Applying those principles, he was able to distinguish Hankey v. Clavering on the basis that, if the notice was reasonably read by a reasonable tenant, the mistake (viz., specifying 1973) was obvious on the face of it and there was no doubt what that mistake was, i.e. that the date 1973 must have been typed instead of 1975 which the landlord had intended to specify. It is in this sense that the test stated by Goulding J. earlier in his judgment must be understood, as was made plain when he went on to say that if, instead of the earlier date of 1973, the later date of 1976 had been typed for 1975, such a mistake would probably have been incurable, because "although the tenant might suspect there was a slip, it might be that the landlord did intend 1976, not knowing or understanding his rights under the lease" (p. 446E). Having regard to the reasoning of Goulding J. in his judgment, the suggestion that the test earlier stated by him constituted a departure by him from the well-established authorities by which he was bound is, frankly, untenable. Moreover, it is also plain from his judgment that, in considering the question whether the notice, on its true construction, complied with the clause in the lease, he was entitled to have regard to the terms of the lease; indeed, it is difficult to see how he could otherwise have considered that question. In this respect, the decision is well summarised in the headnote to the report.



 

      In Micrografix the tenants gave a notice determining the lease on 23 March 1995 when under the relevant clause they could only have done so on 23 June 1995. Jacob J. held that, as the landlords knew that the date of determination could only be 23 June 1995, they would not have been misled, and the notice should therefore be treated as an effective notice to determine the lease on the correct date, viz. 23 June 1995. In my opinion that decision was contrary to the long established line of authority, including Hankey v. Clavering [1942] 2 K.B. 326, by which Jacob J. was bound. It failed to give effect to the underlying principle that the notice must, on its true construction, conform to the agreed specification in the applicable clause, failing which it will not under the contract be effective for its purpose. On its true construction it could not be read as a notice taking effect on 23 June 1995, because there was no reason to believe that the landlords must have intended to give a notice on that date; on the contrary, in all probability they gave the wrong date as a result of a mistaken view of their rights. I wish to add that the invocation of Goulding J.'s test by the Court of Appeal in Germax Securities Ltd. v. Spiegel (1978) 37 P. & C.R. 204 reveals no such error, because (as Buckley L.J. pointed out at p. 206) the mistaken date in that case was not in the operative part of the notice.

      Mr. Cherryman also relied upon the decision of the Court of Appeal in Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445, in which the test propounded by Goulding J. in Carradine was referred to in the judgment of Slade L.J., at p. 454. That case was concerned with the meaning and effect of notices to complete served by a vendor on a purchaser of land. Under the contract it was provided that, upon service of such a notice, the transaction should "be completed within 15 working days of service and in respect of such period time shall be of the essence". The notices however substituted a period of 28 days for the period of 15 days. The purchaser, lacking the necessary funds, failed to complete within the period of 28 days; then, having obtained the necessary funds a few days later, sought specific performance of the contract. The vendor claimed that he had rescinded the contract on the purchaser's failure to comply with the notice to complete. The question at issue was whether that notice was effective. The Court of Appeal held that it was. Slade L.J. said, at p. 455, that there was only one sense in which any reasonable recipient would have read it, viz. that the vendor would not exercise the rights conferred by the contract (to rescind if the purchaser did not complete within 15 days), provided that the purchaser completed within 28 days. Bingham L.J., who reached the same conclusion, said, at p. 457:

I can see nothing in the judgments in this case which detracts from the principles which I have already stated.

      In the end Mr. Cherryman was forced to submit in his reply that Hankey v. Clavering should be overruled. In doing so, he was faced with the dual handicap, first, that no such argument had been foreshadowed in his printed case, and second, that he was in truth inviting your Lordships to overrule not merely Hankey v. Clavering itself but the long line of authority which had preceded it. Even so, I have considered with some care whether your Lordships should accept this submission. In doing so I have, as previously stated, recognised that, on occasion, the recipient of a notice under, for example, a break clause in a lease may, as here, treat it as ineffective because it does not comply with the contractual specification, even though he must have been aware that the giver of the notice intended to comply with the clause and only failed to do so through a mistake on his part. I am, however, driven to state that there are formidable obstacles in the way of Mr. Cherryman's submission.

      The suggestion is that a more relaxed approach be adopted to the construction of notices of this kind, so that, if it is clear that the giver of the notice intended to comply with the provisions of the clause, he should be held to have done so, despite an erroneous choice of the date on which the notice is to take effect. It was submitted that, provided that this test is expressed in sufficiently strict terms, so that the recipient is left in no reasonable doubt that the giver of the notice intended to comply with the clause, this approach should not lead to any undue uncertainty in its application. This latter argument I do not find persuasive. There is a wide range of possible errors, and there are bound to be cases on the borderline in which there is doubt whether the intention is sufficiently clear. More fundamentally, however, it seems to me that the adoption of such a test in truth requires that a new meaning should be given to clauses of this kind, so that they are read as requiring no more than that the giver of the notice should express a clear intention to exercise his rights under the clause, instead of requiring that the date on which it is to take effect must be expressly identified, either as such or with reference to the terms of the clause.

      I have no doubt that this may indeed be the meaning properly to be attributed to many contractual provisions conferring a right exercisable upon notice. But the difficulty in the way of so holding in the case of clauses in leases, such as the break clause in the present case, is that for well over a century a different construction has been placed upon them. Innumerable leases, many of them still in force, must have been drafted on the understanding that they bear the well-known meaning established in the authorities. It follows that, quite apart from the element of uncertainty to which I have referred, the step which your Lordships are being invited to take would have a retrospective effect. In these circumstances I am most reluctant to depart from the established meaning unless I am persuaded that there is very good reason to do so.

      In considering this question, I start from the position not only that the established meaning is clear and well-known, but also that the trap which the tenant fell into in the present case is easily avoided by adopting the familiar stratagem of invoking, as an alternative to the specified date, a date identifiable by reference to the terms of the clause itself. In these circumstances I am driven to wonder how often it occurs that, among the numerous notices of this kind which are given each year, mistakes of this kind are made. I simply do not know; though I cannot help suspecting that such cases are very few. If they were more frequent than I suspect, it would be surprising if there was not a greater move for such clauses to be drafted in different terms, or even for the legislature to require that such clauses should be read as having a different effect. In these circumstances I find myself responding to the submission made by Mr. Patten Q.C., in his admirable argument on behalf of the respondent landlords, that it is inadvisable for the judges to disturb this well-settled branch of the law. After all, the number of notices given each year under leases must be very great. Their effect, if challenged, will ordinarily fall to be considered in the County Court. At present, the applicable law is clear and well-settled, and Mr. Patten informed your Lordships that disputes were rare. In these circumstances the change in the law now proposed would not, in my opinion, be justified.

      For these reasons, I would dismiss the appeal.



LORD JAUNCEY OF TULLICHETTLE


My Lords,

      Clause 7(13) of each lease empowered the appellant as tenant to terminate the lease by serving not less than six months notice "to expire on the third anniversary of the term commencement date [to] determine this lease and upon expiry of such notice this notice shall cease and determine . . . ." The words underlined (by me) refer to the expiry of the period of not less than six months which must be contemporaneous with the termination of the lease. It is agreed that the third anniversary expired on 13 January 1995. However the notices, although stated to be pursuant to clause 7(13) bore to determine the leases on 12 January, the day before a notice given in accordance with that provision could expire. The question is whether the reference to 12 instead of 13 January is fatal to the validity of the notices. The Court of Appeal, reversing the decision of the judge, held that it was.

      Notices terminating a tenancy are technical documents because they are effective without the consent of the receiver. It is therefore essential that they conform to the statutory or contractual provisions under which they are given. In Cadby v. Martinez (1840) 11 Ad. & El. 720, Lord Denman C.J., at p. 726, observed that a covenant in a lease "cannot be got rid of by any notice to quit which is not in accordance with the proviso introduced into the lease for the purpose". This proposition was expressly approved more than a hundred years later in Hankey v. Clavering [1942] 2 K.B. 326, 330 by Lord Greene M.R. Mr. Cherryman Q.C. for the tenants in his opening speech accepted this proposition but argued that properly construed the notices did accord with clause 7(13) of the lease inasmuch as the specific reference thereto predominated over the subordinate and unnecessary reference to the date 12 January. The notices would have been perfectly good if the words "12 January 1995" had been omitted. My Lords, I reject this contention. Clause 7(13) required that the notice be expressed to expire in accordance with the provisions thereof. This could be achieved either by reference to the correct date or by repeating the formula "to expire on . . . " in the clause. This was the form of notice which the tenants had agreed to serve but which in the event they did not. The notice contains within itself a specific date upon which the tenancy is to determine. Is that date to be construed as another date because of the reference to the empowering provisions of clause 7(13) or are those provisions to be construed as authorising notices which do not strictly conform to what has been agreed? In Hankey v. Clavering the Court of Appeal had to determine the validity of a landlord's notice to quit which purported to terminate a tenancy some four days before the break clause in the lease permitted this to be done. In terms of the lease termination thereof could properly take place on 25 December 1941 whereas the notice was in inter alia the following terms (p. 327):

In accepting that the date in the notice was obviously a slip Lord Greene M.R. rejected the temptation to put a strained construction on the document in order to aid someone who had made an unfortunate slip. At pp. 329-330 he said:

I take from these observations the proposition that if a notice to quit is ex facie clear and specific as to a matter such as the subjects to which it relates or the date upon which it is to operate it matters not that consideration of the empowering provision demonstrates a discrepancy between it and the notice. The case of ambiguity to which Lord Greene M.R. referred was one appearing on the face of the notice and not one which was only apparent from a consideration of the lease. Indeed it was implicit in the notice in that case that it was given in pursuance of the landlord's contractual powers with which it did not accord. However, the conflicting terms of the lease did not save it. Furthermore I can see no reason for construing clause 7(13) as permitting non-conforming notices.

      It was argued that the specific reference to clause 7(13) distinguished this case from Hankey v. Clavering. I disagree. If it were appropriate to read into an otherwise clear and specific notice a contractual power for the purpose of substituting a correct for an incorrect date Lord Greene M.R. would no doubt have done so, given his observation as to the court endeavouring to give validity to a document. I see no difference in principle between an implied reference to a contractual provision and an express one. If Hankey v. Clavering is still good law then the notice given by this tenant was ineffective.

      I turn to consider whether the law has, as Mr. Cherryman submitted, during the last 50 years developed a more flexible attitude to notices to quit which contained inaccuracies. In Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442 Goulding J. held that a notice by landlords correctly dated 6 September 1974, to determine a lease on 27 September 1973 would be interpreted as a notice to determine on 27 September 1975, a date which accorded with the provisions of the break clause. The judge after referring to the need for a party to comply strictly with the requirement for the exercise of an option or break clause continued, at p. 446C:

      In this passage the judge was contrasting the situation where it was apparent from the face of the notice that the date of determination must be mistaken because it had already passed with one where the date of determination had yet to come and where it could not therefore be seen from the notice itself that the date was inserted in error. Mr. Cherryman argued that the judge was correct in relation to the first situation but wrong in relation to the second. In my view the distinction drawn by Goulding J. was entirely logical. In the first situation, which was the case before him, it only required a glance at the notice to see that the date of determination must be a mistake. This was not the position in Hankey v. Clavering [1942] 2 K.B. 326. In the second situation there was nothing within the four corners of the notice which showed that 1976 was a mistake. This was the position in Hankey v. Clavering.

      In Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445 a contract for sale of property provided inter alia for service of a completion notice requiring the transaction to be completed within 15 days. The seller served such a notice requiring completion within 28 days and the buyers challenged its validity. The Court of Appeal held that the notice was valid since a reasonable reader thereof could only have concluded that the notice was intended to be one conforming to the empowering provision and that the sellers were giving him 28 days instead of 15 to complete. This was not a case of a party serving a notice which he was not empowered to serve but rather of a party exercising forbearance in the strict compliance with a contractual term in his favour by giving, as he was entitled, to do, a longer period of notice than was required. The case is no support for the tenant's argument that 13 January should be substituted for 12 January. In Micrografix v. Woking 8 Ltd. [1995] 2 E.G.L.R. 32 the provisions of a lease entitled tenants to give not less than 12 months notice of their intention to determine the lease on 23 June 1995. In January 1994 they sent a letter stating that they were enclosing a notice determining the lease on 23 March 1995, which notice stated the date of determination as 23 March 1994. Jacob J. in holding that the notice was valid because the landlords would not have been misled by the pair of wrong dates and would have seen exactly what the tenants intended, observed that Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442 was the modern approach to construction of documents which was more in favour of making them work than in the past. After referring to Goulding J.'s second situation, he stated, at p. 33:

      My Lords I consider that Jacob J. was in error in placing so much reliance on the understanding of the landlord. Lord Greene M.R. in the passage from Hankey v. Clavering [1942] 2 K.B. 326, 329-330, to which I have already referred emphasised that even certainty by a recipient that a date was a slip would not cure the defect and this view was echoed in the Court of Appeal in this case by Nourse L.J. [1995] 1 W.L.R. 1508, 1513F-G. In Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445, 455F, Slade L.J. accepted at p. 4555F that the absence of confusion or prejudice on the part of the recipient was irrelevant. Their Lordships were referred to no other case in which this approach had been questioned nor the stricter approach of Lord Greene M.R. in Hankey v. Clavering [1942] 2 K.B. 326, 329-330, doubted. Micrografix [1995] 2 E.G.L.R. 32 was the only case cited in argument in which the court had construed a specific date as other than that stated and in which the error did not, as in Carradine, proclaim itself from the face of the notice. I consider that it was wrongly decided.

      Hankey v. Clavering is a case of considerable authority, which has stood unchallenged and been applied for more than 50 years. Mr. Cherryman only sought to challenge it with no great enthusiasm in the last speech. I am not persuaded that there is any good reason for departing from the principles enunciated by Lord Greene M.R. It would be tempting to say that where a notice is disconform to that stipulated in the relevant empowering provision due to a slip which was obvious to any reasonable receiver thereof it may be construed so as to conform. However I can see considerable difficulties arising out of the application of such a principle. On one view it could be said that the giver of a notice empowered by a contractual provision always intends to comply with that provision thus however far such notice departed from what was contractually required it could be construed to conform with such requirements. On another view it could be argued that a notice which departed substantially from what was required cannot have been intended to conform but was intended to depart from contractual requirements or given in ignorance thereof. Where is the line to be drawn between defective notices which can and those which cannot be construed so as to conform: Such possibilities would create inevitable uncertainties which as Mr. Patten Q.C. for the landlord submitted would be likely to lead to increased litigation. There will, of course, be cases where an unintended slip in the drafting of a notice will result in hardship to the giver thereof but he will only have himself to blame for not complying with the terms of the empowering provision. Against this, however, must be measured the advantage to the recipient of certainty inasmuch as a date in a notice is to be read as stated unless it is obvious from the face of the notice that it must be mistaken.

      Applying Lord Greene M.R.'s principles to this case, the tenant had no power under clause 7(13) to determine the lease on 12 January from which it follows that their notice was ineffective.

      My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley with whose reasoning I am in entire agreement. I would therefore dismiss the appeal.



LORD STEYN


My Lords,

      The short but not uncomplicated question is whether notices given by a tenant to a landlord purportedly under a right to determine reserved in terms of leases for fixed terms were effective to determine the leases.

      The landlord is Eagle Star Life Assurance Co. Ltd. The tenant is Mannai Investment Co. Ltd. There are two leases both dated 11 March 1992. The demised property consists of office premises and car parking space in London, S.W.1. The two leases demised the office premises and the car parking space in each case "For the term of 10 years subject to the provisions of clause 7(13) hereof from and including 13 January 1992. . ." Clause 7 (13) of each lease provided as follows:

Under each lease the term granted included 13 January as the first day of the term. The "term commencement date" in clause 7(13) was not defined in either lease. But it is common ground that by reason of the words "from and including 13 January 1992" it was that date. Accordingly, it was agreed that the third anniversary of the "term commencement date" was 13 January 1995.

      By two letters dated 24 June 1994 and served on the landlord more than 6 months before 13 January 1995 the tenant gave notice to the landlord in respect of each lease as follows:

      The tenant contended that the leases were determined by the notices. The landlord claimed that the notices did not comply with the right reserved under clause 7(13) and that the notices were ineffective in law.

      By an originating summons the tenant sought a declaration that the notices effectively determined the leases. The matter came before His Honour Judge Rich Q.C., sitting as a judge of the High Court in the Chancery Division. Relying on Sidebotham v. Holland [1895] 1 Q.B. 378 Judge Rich held that the notices were good inasmuch as they did not take effect until that moment of time which was both the last moment of 12 January and the first of 13 January, so that they did determine the leases on 13 January. The landlord appealed to the Court of Appeal.

      Two issues were debated in the Court of Appeal. The first was whether, despite the erroneous reference in the notices to 12 rather than 13 January, the notices were nevertheless as a matter of construction sufficiently clear to be effective: this was described as the construction point. The second issue was whether the notices were saved by what was called the special rule in Sidebotham v. Holland. The Court of Appeal decided both issues against the tenant: Mannai Investment Co. Ltd. v. Eagle Star Insurance Co. Ltd. [1995] 1 W.L.R. 1508. The Court of Appeal held that the notices did not determine the leases.

      On the appeal to your Lordship's House counsel for the tenant again advanced both arguments. The point of construction is one of substance. Despite a lucid argument by junior counsel for the tenant your Lordships were of the view, which I shared, that the argument based on Sidebotham v. Holland [1895] 1 Q.B. 378 was plainly wrong and did not find it necessary to call on counsel for the landlord to reply on this issue. As Nourse L.J. [1995] 1 W.L.R. 1508, 1515F trenchantly explained in the Court of Appeal Sidebotham v. Holland is no authority for the proposition that in respect of a lease for a fixed term a notice served on one day can be treated as a notice served on the next. That disposed of this point. I turn therefore to the construction of the notices.

      On reflection I have come to the conclusion that the question of the construction of the notices should be answered by holding that the notices were effective to determine the leases. I will first summarise my analysis of the problem before I explain why I feel unable to accept the attractively presented arguments of counsel for the landlord.

      The reasons for my conclusion can be stated in the form of numbered propositions:

      (1)      This is not a case of a contractual right to determine which prescribes as an indispensable condition for its effective exercise that the notice must contain specific information. After providing for the form of the notice ("in writing"), its duration ("not less than six months") and service ("on the landlord or its solicitors"), the only words in clause 7(13) relevant to the content of the notice are the words "notice to expire on the third anniversary of the term commencement date determine this lease". Those words do not have any customary meaning in a technical sense. No terms of art are involved. And neither side has suggested that anything should be implied into the language. That is not surprising since the tests governing the implication of terms could not conceivably be satisfied. The language of clause 7(13) must be given its ordinary meaning. A notice simply expressed to determine the lease on third anniversary of the commencement date would therefore have been effective. The principle is that that is certain which the context renders certain: Sunrose Ltd. v. Gould [1962] 1 W.L.R. 20.



 

      (2)      The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene. The approach in Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989, which deals with the construction of commercial contracts, is by analogy of assistance in respect of unilateral notices such as those under consideration in the present case. Relying on the reasoning in Lord Wilberforce's speech in Reardon Smith, at 996D to 997D, three propositions can be formulated. First, in respect of contracts and contractual notices the contextual scene is always relevant. Secondly, what is admissible as a matter of the rules of evidence under this heading is what is arguably relevant. But admissibility is not the decisive matter. The real question is what evidence of surrounding circumstances may ultimately be allowed to influence the question of interpretation. That depends on what meanings the language read against the objective contextual scene will let in. Thirdly, the enquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases. Given that the reasonable recipient must be credited with knowledge of the critical date and the terms of clause 7(13) the question is simply how the reasonable recipient would have understood such a notice. This proposition may in other cases require qualification. Depending on the circumstances a party may be precluded by an estoppel by convention from raising a contention contrary to a common assumption of fact or law (which could include the validity of a notice) upon which they have acted: Norwegian American Cruises A/S (formerly Norwegian American Lines A/S) v. Paul Munday Ltd. (The "Vistafjord") [1988] 2 Lloyds Rep. 343. Such an issue may involve subjective questions. That is, however, a different issue and not one relevant to this appeal. I proceed therefore to examine the matter objectively.

      (3)      It is important not to lose sight of the purpose of a notice under the break clause. It serves one purpose only: to inform the landlord that the tenant has decided to determine the lease in accordance with the right reserved. That purpose must be relevant to the construction and validity of the notice. Prima facie one would expect that if a notice unambiguously conveys a decision to determine a court may nowadays ignore immaterial errors which would not have misled a reasonable recipient.

      (4)      There is no justification for placing notices under a break clause in leases in a unique category. Making due allowance for contextual differences, such notices belong to the general class of unilateral notices served under contractual rights reserved, e.g. notices to quit, notices to determine licences and notices to complete: Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445, 454E-G. To those examples may be added notices under charter parties, contracts of affreightment, and so forth. Even if such notices under contractual rights reserved contain errors they may be valid if they are "sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate": the Delta case, at p. 454E-G, per Slade L.J. and adopted by Stocker L.J. and Bingham L.J: see also Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442, 444. That test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised. It acknowledges the importance of such notices. The application of that test is principled and cannot cause any injustice to a recipient of the notice. I would gratefully adopt it.

      (5)      That brings me to the application of this test. The facts are simple. Crediting a reasonable recipient with knowledge of the terms of the lease and third anniversary date (13 January), I venture to suggest that it is obvious that a reasonable recipient would have appreciated that the tenant wished to determine the leases on the third anniversary date of the leases but wrongly described it as the 12th instead of the 13th. The reasonable recipient would not have been perplexed in any way by the minor error in the notices. The notices would have achieved their intended purpose.

      That brings me to the contrary reasoning of the Court of Appeal in this case, and the submission of counsel for the landlord. Central to both was the proposition that Hankey v. Clavering [1942] 2 K.B. 326 precluded such a conclusion. Given the importance ascribed to this decision I must embark on what Justice Cardozo once described as a gruesome autopsy. In Hankey v. Clavering there was a lease for a term of 21 years from 25 December 1934. The lease provided, inter alia, that if either party should desire to determine the lease after seven or fourteen years he could do so by giving to the other party six months' notice. The landlord gave notice to the tenant as from June 1941, which purported to terminate the lease on 21 December 1941. On 8 March 1940 the landlord's solicitors acknowledged the notice as "properly served upon us". The tenant refused to give up possession of the premises. The landlord brought an action for possession. Mr. Denning, K.C., submitted that the landlord attempted to terminate the tenancy on 21 December whereas he was only entitled to terminate it on 25 December. In these circumstance, he said, that the defect could not be cured by showing that the other party understood what was meant. Mr. Blanco White, K.C., argued that if a notice can be understood by a reasonable person it is a good notice. The judge decided in favour of the landlord on the effect of the correspondence. The matter came before a two judge Court of Appeal. It was disposed of by ex tempore judgments. Lord Greene M.R. gave the principal judgment; Lord Clauson added nothing of substance. The Court of Appeal ruled that the judge had misinterpreted the correspondence. Turning to the construction of the notice, Lord Greene M.R. said (at pp. 329-330):

Lord Greene M.R. said that his ruling was based on Cadby v. Martinez, 11 Ad. & El. 720, which he described of as "a case of the highest authority in these matters". Lord Denman C.J. said in that case (at p. 726) that "the covenant to pay rent during the whole term cannot be got rid of by any notice to quit which is not in accordance with the proviso introduced into the lease for the purpose".

      It goes without saying that any judgment of Lord Greene M.R. is entitled to great respect. But one must put the case in context. First, in relying on Cadby v. Martinex Lord Greene was founding his proposition on a case which with the benefit of hindsight seems far from conclusive on the point. Lord Denman C.J.'s judgment contains no reasoning at all; it is purely conclusionary. A century and a half later it is sometimes necessary to consider the force of reasoning in decided cases. Cadby v. Martinez does not enable one to do so. In any event, Lord Denman's conclusion is in such absolute terms as to be of little value. It is not supported in this case by the judgment in the Court of Appeal or by the submissions of counsel for the landlord: it is conceded that some errors in a notice can be ignored. The real question is: What errors can be overlooked? Taking due account of what Lord Greene thought of Cadby v. Martinex in 1942, I incline to the view that the persuasive force of this precedent must be regarded as slight. Secondly, it is noteworthy that Lord Greene does not expressly pose an objective test. He dismisses the reaction of the recipient ("however much the recipient might guess"). The law has moved on. The test is entirely objective. Thirdly, Lord Greene did not expressly deal with the position where the notice contains an error which proves wholly immaterial and incapable of causing any confusion. The second and third matters detract from the force of reasoning in Hankey v. Clavering. Lord Greene was not considering the issues as they have to be faced in this case. But there is a fourth point to be taken into account. Hankey v. Clavering was decided more than half a century ago. Since then there has been a shift from strict construction of commercial instruments to what is sometimes called purposive construction of such documents. Lord Diplock deprecated the use of that phrase in regard to the construction of private contracts as opposed to the construction of statutes: Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201D. That is understandable. There are obvious differences between the processes of interpretation in regard to private contracts and public statutes. For a perceptive exploration of the differences in the context of United States law, see Robert S. Summers, "Statutes and Contracts as Founts of Formal Reasoning", in Essays for Patrick Atiyah, edited by Peter Cane and Jane Stapleton (1991) 71 et seq. It is better to speak of a shift towards commercial interpretation. About the fact of the change in approach to construction there is no doubt. One illustration will be sufficient. In Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201D, Lord Diplock in a speech concurred in by his fellow Law Lords observed that

      In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language. In contradistinction to this modern approach Lord Greene's judgment in Hankey v. Clavering is rigid and formalistic. Nowadays one expects a notice to determine under a commercial lease to be interpreted not as a "technical document" but in accordance with business common sense: see Micrografix v. Woking 8 Ltd. [1995] 2 E.G.L.R. 32. After all, there is no reason whatever why such a document must be drafted by a lawyer. Qualitatively, the notices are of the same type as notices under charter parties and contracts of affreightment. Such notices, even if they entail the exercise of important options, are habitually drafted by commercial men rather than lawyers. It would be a disservice to commercial practice to classify such notices as technical documents and to require them to be interpreted as such. Nowadays one must substitute for the rigid rule in Hankey v. Clavering the standard of a commercial construction.

      It is, however, also important to note that the decision in Hankey v. Clavering caused surprise even in 1942. There was a case note on Hankey v. Clavering bearing the initials R.E.M: (1943) 59 L.Q.R. 17. The author of the note was a great authority on the field of landlord and tenant. He later became Sir Robert Megarry, Vice Chancellor of the Chancery Division. He was clearly surprised at the decision. He drew attention to Lord Greene M.R.'s decision in Price v. Mann [1942] 1 All E.R. 453. In that case the question was whether under the Landlord and Tenant (War Damage) Act 1939 a notice to avoid disclaimer given by the landlord, requiring the tenant to retain the lease on the terms set out in section 10, was invalid because section 10 was irrelevant and by mistake inserted for section 11. The Court of Appeal held that the notice was good. Lord Greene M.R. said (at p. 454):

Mr. Megarry observed, at p. 18:

Lord Greene's observation in Price v. Mann is much closer to the modern standard of commercial construction than Hankey v. Clavering.

      Counsel for the tenant invited the House in his case and in his reply to say that Hankey v. Clavering was wrongly decided. I am content to say that it no longer represents the law. Like Lord Hoffmann I would hold that the correct test for the validity of a notice is that posed by Goulding J. in Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442, 444, viz. "Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?"

      It is necessary to turn briefly to other arguments advanced by counsel for the landlord. He argued that the tenant's construction argument must fail because the tenant's error may have been due to a mistaken legal view. He said that it may not have been a case of a mistaken insertion of a date but the tenant may have intended to refer to the 12th. This reveals a contradiction in the landlord's argument. Counsel for the landlord accepted that the test is an objective one: How would a reasonable recipient have understood the notice? But then he invited your Lordships to speculate that the tenant's error was due to a mistake of law rather than a typing or clerical error. That argument, if accepted, would drive a juggernaut through the objective test. Speculation about the subjective intention of the tenant is irrelevant. The only question is how a reasonable recipient would have understood the notice.

      Counsel also argued that as a matter of legal logic a process of interpretation can never permit one to substitute 13 January for 12 January. Why should that be so? If a contract contains a termination date linked to an intended three year period, which is variously expressed in the contract as 12 January and 13 January, why should the court not as a matter of interpretation be able to select the date which best matches the contractual intent? The same reasoning must apply to unilateral documents such as contractual notices. It is surely permissible in all cases satisfying the test that no reasonable recipient of the notice could be misled. Counsel's argument is based on too formalistic a formulation of the question to be decided. The question is not whether 12 January can mean 13 January: it self-evidently cannot. The real question is a different one: Does the notice construed against its contextual setting unambiguously inform a reasonable recipient how and when the notice is to operate under the right reserved? As Lord Hoffmann has observed we no longer confuse the meaning of words with the question of what meaning in a particular setting the use of words was intended to convey.

      That brings me to counsel's argument that, if the notices are treated as valid, there will be great deal of confusion and unnecessary litigation. Experience teaches that 'floodgates' arguments need to be examined with an initial scepticism. In this case the predictions of counsel are unrealistic. Those arguments must be judged on the basis that the test posed above is accepted. That test can only be satisfied where the reasonable recipient could be left in no doubt whatever. It is in accord with business common sense that in cases where that simple and straightforward test is satisfied the notices should be treated as valid.

      That brings me to my conclusion. I do not accept the extreme argument of counsel for the tenant that whenever a notice to determine refers to a break clause, and whatever the other circumstances of the case, the notice must be valid. That goes too far. One can easily conceive of much weaker cases where the test posed above could not be satisfied. But in the present case it would have been obvious to a reasonable recipient that the notices contained a minor misdescription and that the notices conveyed that the tenant sought to determine the leases on "on third anniversary of the term commencement", i.e. 13 January. I end this judgment with the words with which in 1903 Sir Leslie Stephen concluded a famous series of lectures: "I hope I have not said anything original".

      It follows that I would allow the appeal.



LORD HOFFMANN


My Lords,

      The appellant was tenant under two 10-year leases of offices in Jermyn Street, each of which contained in clause 7(13) a right to terminate at the end of the third year in the following terms:

      After the grant of the leases the market rents of offices in the West End fell sharply. On 24 June 1994 the tenant served on the landlord two notices, each of which read as follows: "Pursuant to Clause 7(13) of the Lease we as Tenant hereby give notice to you to determine the lease on 12 January 1995." It is agreed that the third anniversary of the commencement date was actually 13 January 1995. The question is whether notwithstanding this mistake the notices were effective to terminate the leases.

      This might seem a straightforward question, particularly when it is remembered that such notices, operating, as they do, unilaterally to alter the rights of the parties, must comply strictly with the terms of the lease. The Court of Appeal held that the notice was ineffective on the simple ground that "12 January" could not mean "13 January." In so doing, they followed (as in my view they were bound to do) the decision of the Court of Appeal in Hankey v. Clavering [1942] 2 K.B. 326 which in turn had followed the decision of the Court of Queen's Bench in Cadby v. Martinez (1840) 11 Ad. & El. 720. In that case, the notice said Midsummer instead of Lady Day. It seemed obvious to Lord Denman C.J. that there was no way in which it could be construed to refer to Lady Day and he merely observed, at p. 726, that "in [no case] has a proviso or covenant in a deed been held to be satisfied by a notice inconsistent with the terms of it."

      And yet, my Lords, the case is by no means straightforward. The clause does not require the tenant to use any particular form of words. He must use words which unambiguously convey a particular meaning, namely an intention to terminate the lease on 13 January. In Hankey v.Clavering [1942] 2 K.B. 326, where the notice to quit said "21 December" instead of "25 December", Lord Greene M.R. said, at pp. 328, 330, ". . . the whole thing was obviously a slip" on the part of the landlord but that the notice was invalid "however much the recipient might guess, or however certain he might be" that it was a mere slip. So even if the recipient was certain that the landlord actually wanted to terminate his tenancy on the right date, which was 25 December, so that the necessary intention was unambiguously communicated, the notice was bad. One is bound to be left with a feeling that something has gone wrong here. Common sense cannot produce such a result; it must be the result of some rule of law. If so, what is that rule and is it correct?

      I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays an indispensable part in the way we interpret what anyone is saying. No one, for example, has any difficulty in understanding Mrs. Malaprop. When she says "She is as obstinate as an allegory on the banks of the Nile", we reject the conventional or literal meaning of allegory as making nonsense of the sentence and substitute "alligator" by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like "allegory".

      Mrs. Malaprop's problem was an imperfect understanding of the conventional meanings of English words. But the reason for the mistake does not really matter. We use the same process of adjustment when people have made mistakes about names or descriptions or days or times because they have forgotten or become mixed up. If one meets an acquaintance and he says "And how is Mary?" it may be obvious that he is referring to one's wife, even if she is in fact called Jane. One may even, to avoid embarrassment, answer "Very well, thank you" without drawing attention to his mistake. The message has been unambiguously received and understood.

      If one applies that kind of interpretation to the notice in this case, there will also be no ambiguity. The reasonable recipient will see that in purporting to terminate pursuant to clause 7(13) but naming 12 January 1995 as the day upon which he will do so, the tenant has made a mistake. He will reject as too improbable the possibility that the tenant meant that unless he could terminate on 12 January, he did not want to terminate at all. He will therefore understand the notice to mean that the tenant wants to terminate on the date on which, in accordance with clause 7(13), he may do so, i.e. 13 January.

      Why, then, do cases like Hankey v. Clavering [1942] 2 K.B. 326 arrive at a different answer? I want first to deal with two explanations which seem to me obviously inadequate. First, it is sometimes said that the examples which I have given from ordinary life are concerned with what the speaker meant to say. He may subjectively have intended to say something different from what he actually said and it may be possible, by the kind of reasoning which I have described, to divine what his subjective intentions were. But the law is not concerned with subjective intentions. All that matters is the objective meaning of the words which he has used.

      It is of course true that the law is not concerned with the speaker's subjective intentions. But the notion that the law's concern is therefore with the "meaning of his words" conceals an important ambiguity. The ambiguity lies in a failure to distinguish between the meanings of words and the question of what would be understood as the meaning of a person who uses words. The meaning of words, as they would appear in a dictionary, and the effect of their syntactical arrangement, as it would appear in a grammar, is part of the material which we use to understand a speaker's utterance. But it is only a part; another part is our knowledge of the background against which the utterance was made. It is that background which enables us, not only to choose the intended meaning when a word has more than one dictionary meaning but also, in the ways I have explained, to understand a speaker's meaning, often without ambiguity, when he has used the wrong words.

      When, therefore, lawyers say that they are concerned, not with subjective meaning but with the meaning of the language which the speaker has used, what they mean is that they are concerned with what he would objectively have been understood to mean. This involves examining not only the words and the grammar but the background as well. So, for example, in Doe d.Cox v. Roe (1803) 4 Esp. 185 the landlord of a public house in Limehouse gave notice to quit "the premises which you hold of me. . . commonly called . . . the Waterman's Arms." The evidence showed that the tenant held no premises called the Waterman's Arms; indeed, there were no such premises in the parish of Limehouse. But the tenant did hold premises of the landlord called the Bricklayer's Arms. By reference to the background, the notice was construed as referring to the Bricklayer's Arms. The meaning was objectively clear to a reasonable recipient, even though the landlord had used the wrong name. We therefore will in due course have to answer the question: if, as long ago as 1803, the background could be used to show that a person who speaks of the Waterman's Arms means the Bricklayer's Arms, why can it not show that a person who speaks of 12 January means 13 January?

      The immediate point, however, is that the fact that the law does not have regard to subjective meaning is no explanation of the way Hankey v. Clavering [1942] 2 K.B. 326 was decided. There was no need to resort to subjective meaning: the notice would objectively have been understood to mean that the landlord wanted to terminate the tenancy on the day on which he was entitled to do so.


 

      I pass on to a second explanation which also seems to me inadequate. Lord Greene M.R. said at pp. 329-330, that because such notices have unilateral operation, the conditions under which they may be served must be strictly complied with. I have already said that this principle is accepted on both sides. But, as an explanation of the method of construction used in Hankey v. Clavering, it begs the question. If the clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper, however clear it might have been that the tenant wanted to terminate the lease. But the condition in clause 7(13) related solely to the meaning which the notice had to communicate to the landlord. If compliance had to be judged by applying the ordinary techniques for interpreting communications, there was strict compliance. The notice clearly and unambiguously communicated the required message. To say that compliance must be strict does not explain why some other technique of interpretation is being used or what it is.

      A variation of this explanation is to say that the language of the notice must be strictly construed. But what does it mean to say that a document must be "strictly" construed, as opposed to the normal process of ascertaining the intentions of the author? The expression does not explain itself. If it operates merely by way of intensification, so that the intention must be clear, unambiguous, incapable of misleading, then I think that the notice in this case satisfied the test at that level. Likewise, as Lord Greene M.R. acknowledged when he said that the whole thing was obviously a slip, did the notice in Hankey v. Clavering. So the concept of strict construction does not explain the decision.

      A more promising clue to the explanation is Lord Greene's statement, in two places, that the notice must "on its face" comply with the terms of the lease. What does "on its face" mean? Clearly, the face of the document is being contrasted with the background, in law sometimes called the "extrinsic evidence", against which the language is ordinarily construed. But Lord Greene cannot have meant that the document must always be read without any background, because (even if, which I doubt, it were conceptually possible to interpret the use of language without the aid of any background) cases like the Cox case, 4 Esp. 185 show that some background, at least, can be used. It appears, therefore, that Lord Greene is referring to some principle whereby background can be used to show that a person who speaks of the Waterman's Arms means the Bricklayer's Arms, but not that a person who speaks of 12 January means 13 January. What principle is this?

      It is, I think, to be found in an old rule about the admissibility of extrinsic evidence to construe legal documents. In its pure form, the rule was said to be that if the words of the document were capable of referring unambiguously to a person or thing, no extrinsic evidence was admissible to show that the author was using them to refer to something or someone else. An extreme example is in In the Goods of Peel (1870) L.R. 2 P. & D. 46, in which the testator appointed "Francis Courtnay Thorpe, of Hampton . . . Middlesex" to be his executor. There was a Francis Courtenay Thorpe of Hampton, Middlesex. He was however only 12 years old and his father Francis Corbet Thorpe, of Hampton, Middlesex, was an old friend of the testator. Lord Penzance said, at p. 47, that these facts were inadmissible: "The testator makes use of a description which applies in fact to one person, and not to any other." A variation on this rule was In re Fish [1894] 2 Ch. 83 in which the testator left his residuary estate to his "niece Eliza." He had no niece called Eliza but his wife had an illegitimate grandniece called Eliza, to whom the evidence of their relationship showed that he must have intended to refer, and also, as it happened, a legitimate grandniece called Eliza. The Court of Appeal said that the estate went to the legitimate grandniece and that evidence of the relationship between the testator and the illegitimate grandniece was inadmissible. Lindley L.J. said, at p. 85:

      On the other hand, if there was no one to whom the description accurately applied, there was said to be a "latent ambiguity" and evidence of background facts which showed what the testator must have meant, notwithstanding that he had used the wrong words, was admitted.

      Let us compare this rule with ordinary common sense interpretation of what people say. If someone has gone to great pains, well in advance, to secure tickets for himself and a friend for a Beethoven concert at the Royal Festival Hall by a famous visiting orchestra on January 13th and says to the friend a week earlier "I'll see you at the Festival Hall concert on January 12th," it will be obvious that he is referring to the concert on January 13th. According to the old rules of construction, the law will agree if there is no concert at the Festival Hall on January 12th. In that case there is a latent ambiguity. But if there is a concert on that date (Stockhausen, say, played by a different orchestra) he will be taken to have referred to that concert.

      This extraordinary rule of construction is, as it seems to me, the only explanation for the decisions in Hankey v. Clavering [1942] 2 K.B. 326 and Cadby v. Martinez,11 Ad. & El. 720. The Cox case, 4 Esp. 185, was distinguished by counsel in Cadby, at p. 723 as involving a latent ambiguity: there was no Waterman's Arms in Limehouse, so evidence that the landlord would have been understood by a reasonable tenant as intending to refer to the Bricklayer's Arms was admissible. But Midsummer 1837, or 21 December 1941 (in Hankey v. Clavering) or 12 January 1995 (in this case) are all real dates to which the notices could have referred. Therefore evidence of background which showed that a reasonable recipient would have understood the person giving the notice as having intended to refer to a different date had to be disregarded. The effect is that apart from the exceptional case in which the date is obviously impossible on the face of the notice (as in Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442) the intention which the notice would convey as to date has to be determined without regard to the terms of the lease (or anything else) as background. There is an artificial assumption that the reasonable recipient does not know what would be the correct date. On this basis, the interpretation of the notices as referring to the wrong dates and therefore being invalid is, of course, inescapable.

      It is clear that this rule of construction has been applied to the interpretation of notices for at least 200 years and it is hardly surprising that Lord Greene M.R. and Lord Clauson felt obliged to apply it in Hankey v. Clavering and that the Court of Appeal applied it in this case. It is, however, highly artificial and capable of producing results which offend against common sense. Lord Penzance began his decision that the testator had appointed a 12 year old boy as his executor by saying:

      In In re Fish [1894] 2 Ch. 83, 84, Lindley L.J. began his judgment by saying: "This is one of those painful cases in which it is probable that the testator's intention will be defeated" and A.L. Smith L.J. said, at p. 86, that if he could have admitted the evidence about the testator's relationship with his wife's illegitimate grandniece he would gladly have done so.
 I think that the rule is not merely capricious but also, for reasons which I need not develop at length, incoherent. It is based upon an ancient fallacy which assumes that descriptions and proper names can somehow inherently refer to people or things. In fact, of course, words do not in themselves refer to anything; it is people who use words to refer to things. The word "allegory" does not mean a large scaly creature or anything like it, but it is absurd to conclude, as judges sometimes do, that this is not an "available meaning" of the word in the interpretation of what someone has said. This is simply a confusion of two different concepts; as we have seen, a person can use the word "allegory", successfully and unambiguously, to refer to such a creature.

      Even in its natural habitat, the construction of wills, the rule has not been (and, I think, cannot be) applied with any consistency. In National Society for the Prevention of Cruelty to Children v. Scottish National Society for the Prevention of Cruelty to Children [1915] A.C. 207 this House refused to accept that a gift to the "National Society for the Prevention of Cruelty to Children" should go to the society of that name, which had its head office in Leicester Square. It relied upon the background facts that, as Earl Loreburn said, at pp. 211-214, the testator was "a Scotsman living in Scotland" who had made a "Scotch will" to construe the will as intended to refer to the "Scottish National Society for the Prevention of Cruelty of Children". Earl Loreburn refused to accept that there was "a rigid rule" that "once a persona is accurately named in a will" there is not to be "any further inquiry or consideration in regard to the person who is to take the benefit." The true rule, he said, was that "the accurate use of a name in a will creates a strong presumption against any rival who is not the possessor of the name." This demotes the rule to the common sense proposition that in a formal document such as a will, one does not lightly accept that people have used the wrong words. I doubt whether anyone would dissent from this principle, which would present no obstacle to a conclusion that the tenant in this case must have used the wrong words.
      If your Lordships are to follow this path, it will be necessary to say that Hankey v. Clavering and the older cases which it followed are no longer good law. It would be wrong, I think, to distinguish them on narrow grounds and leave them as wrecks in the channel, causing uncertainty and litigation in the future. Furthermore, the old rule of construction has been applied not only to notices exercising break clauses but also to notices to terminate periodic tenancies: Doe d. Spicer v. Lea (1809) 11 East 312. In his admirable submissions on behalf of the landlord, Mr. Patten Q.C. warned that a departure from the old rule would cause great uncertainty in the daily construction of notices to quit in county courts throughout the land. I confess that this prospect has caused me some anxiety and I think that it must be given serious consideration.

      The rule as applied to wills, which restricts the use of background in aid of construction, reflects a distrust of the use of oral evidence to prove the background facts. The people who could give evidence about the background to a will would in most cases be members of the family interested in the outcome of the case and until 1843, persons with an interest in the litigation were not even competent witnesses. No doubt the exclusion of background makes, in a somewhat arbitrary way, for greater certainty in the sense that there is less room for dispute about what the background was and the effect which it has upon the intention to be attributed to the testator. But, as the cases mournfully show, this certainty is bought at the price of interpretations which everyone knows to be contrary to the meaning which he intended.

      There are documents in which the need for certainty is paramount and which admissible background is restricted to avoid the possibility that the same document may have different meanings for different people according to their knowledge of the background. Documents required by bankers' commercial credits fall within this category. Article 13(a) of the Uniform Customs and Practice for Commercial Credits (1993 revision) says (echoing Lord Greene M.R.'s phrase in Hankey v. Clavering) that the documents must "upon their face" appear to be in accordance with the terms and conditions of the credit. But the reasons of policy which require the restriction of background in this case do not apply to notices given pursuant to clauses in leases. In practice, the only relevant background will be, as in this case, the terms of the lease itself, which may show beyond any reasonable doubt what was the intention of the person who gave the notice. There will be no question of the parties not being privy to the same background--both of them will have the lease--and no room for dispute over what the relevant background is.

      In the case of commercial contracts, the restriction on the use of background has been quietly dropped. There are certain special kinds of evidence, such as previous negotiations and express declarations of intent, which for practical reasons which it is unnecessary to analyse, are inadmissible in aid of construction. They can be used only in an action for rectification. But apart from these exceptions, commercial contracts are construed in the light of all the background which could reasonably have been expected to have been available to the parties in order to ascertain what would objectively have been understood to be their intention: Prenn v. Simmonds [1971] 1 W.L.R. 1381, 1383. The fact that the words are capable of a literal application is no obstacle to evidence which demonstrates what a reasonable person with knowledge of the background would have understood the parties to mean, even if this compels one to say that they used the wrong words. In this area, we no longer confuse the meaning of words with the question of what meaning the use of the words was intended to convey. Why, therefore, should the rules for the construction of notices be different from those for the construction of contracts? There seems to me no answer to this question. All that can be said is that the rules for the construction of notices, like those for the construction of wills, have not yet caught up with the move to common sense interpretation of contracts which is marked by the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 W.L.R. 1381 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989. The question is therefore whether there is any reason not to bring the rules for notices up to date by overruling the old cases.

      There can, I think, be no question of anyone having acted in reliance on the principle of construction used in Hankey v. Clavering [1942] 2 K.B. 326. The consequence of such a construction is only to allow one party to take an unmeritorious advantage of another's verbal error, an adventitious bonus upon which no one could have relied. In this respect, the case for rejecting the old authorities is at least as strong as it was in Sudbrook Trading Estate Ltd. v. Eggleton [1983] 1 A.C. 444, in which this House overruled cases going back to the early nineteenth century on the construction of contracts for sale at a valuation.

      Nor do I think that a decision overruling the old cases will create uncertainty as to what the law is. In fact I think that the present law is uncertain and that only a decision of this House, either adopting or rejecting the Hankey v. Clavering rule of construction, will make it certain. So, for example, in Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442, 444, Goulding J. said that the test for the validity of a notice was: "Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?" and he went on to say that the reasonable tenant must be taken to know the terms of the lease. This test was approved by the Court of Appeal in Germax Securities Ltd. v. Spiegal (1978) 37 P. & C.R. 204, 206 and, as will be apparent from what I have already said, I think that it was the right test to adopt. It is, however, absolutely impossible to reconcile the application of such a test with the decision in Hankey v. Clavering, in which no reasonable tenant who knew the terms of the lease could possibly have mistaken the landlord's meaning. It is therefore not surprising that in Micrografix v. Woking 8 Ltd. [1995] 2 E.G.L.R. 32, Jacob J. felt free to dismiss Hankey v. Clavering as "much distinguished" and to ignore it, or that Rattee J. in Garston v. Scottish Widows' Fund and Life Assurance Society [1996] 1 W.L.R. 834 should be puzzled as to why the Court of Appeal in this case considered, as I think rightly, that they were bound by Hankey v. Clavering.

      In my view, therefore, the House should say unequivocally that the test stated by Goulding J. in Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442 was right and that Hankey v. Clavering and the earlier cases should no longer be followed. The notice should be construed against the background of the terms of the lease. Interpreted in this way, the notice in the present case was valid and I would therefore allow the appeal.



LORD CLYDE


My Lords,

      The question in this appeal is whether the two letters dated 24 June 1994 and sent by the appellant tenant to the respondent landlord qualify as effective notices to determine the leases to which each letter respectively referred. Their validity as notices has to be tested against the terms of the power under which they were served. It is accepted that the two cases are for present purposes indistinguishable and that the relevant terms of the power were set out in clause 7(13) and were as follows:

      The substance of the power is expressed by the words "The Tenant may . . . determine this Lease". The method of its exercise is specified by the intervening words. The tenant must give six months' notice; the notice must be in writing; the notice must be served on the landlord or its solicitors. The sub-clause also states that the notice is to expire on the third anniversary of the term commencement date. The significance of that statement is that the period of six months is to terminate on that date. This regulates the time for the giving of the notice. The third anniversary marks the end of the period prior to which a notice under clause 7(13) must be given. But it is not required that the notice should include mention of the date of the intended determination of the lease. That date is prescribed by clause 7(13) where it states that the lease shall determine on expiry of the notice.

      Where a notice of termination complies precisely and unambiguously with the provision which empowers the sending of the notice then its validity should be unquestioned. Where the terms of the notice do not altogether accord with the provisions of the contract that may or may not render the notice unenforceable. The problem then may come to be one of finding a fair and reasonable construction of the notice. But there can be cases where the validity of the notice cannot be saved by any construction and will have to be regarded as bad.

      In some cases it may be obvious from the notice by itself that an error has been made. In Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442 an expressed intention to determine the lease at a date in 1973 was obviously incorrect in a notice served in 1974. In other cases the discrepancy can only be seen from a study of the terms of the lease. One would need to be aware of the provisions of the lease in such a case to appreciate that the permitted date was inaccurately stated. I see no reason in principle why in each of these kinds of case, provided of course that the wording is not absolutely clear and unambiguous, a notice should not be equally open to construction with a view to its possible validation.

      In the present case the two letters in my view satisfy the formal and technical requirements of clause 7(13). But they go further and call for a determination of each lease one day before the day which the sub-clause identified as the date for the determination of the notice and for the determination of the lease. As I have mentioned that was not a formal requisite of the notice. Each notice proclaims at the outset that it is given "Pursuant to Clause 7(13)". This was a precise reference to the particular provision under which the notices were each being sent, as distinct from some general reference to the agreement between the parties. But it is evident from a consideration of that clause that there is a discrepancy between the date there indicated for the termination of the lease and the date stated in the notice. Whether that inaccuracy in the notice is fatal or not depends on the proper construction of the notices. The formulation propounded by Goulding J. in Carradine (p. 444) was "Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?" Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445 concerned a vendor's notice to complete which was in condition 23 of the conditions of sale, but I see no reason why any different principle of construction should apply. Slade L.J. (at p. 454) observed:

The standard of reference is that of the reasonable man exercising his common sense in the context and in the circumstances of the particular case. It is not an absolute clarity or an absolute absence of any possible ambiguity which is desiderated. To demand a perfect precision in matters which are not within the formal requirements of the relevant power would in my view impose an unduly high standard in the framing of notices such as those in issue here. While careless drafting is certainly to be discouraged the evident intention of a notice should not in matters of this kind be rejected in preference for a technical precision.

      The test is an objective one. In circumstances where an estoppel might arise the actual understanding of the recipient may be relevant, but in general the actual understanding of the parties is beside the point. That the test is an objective one was recognised in Micrografix v. Woking 8 Ltd. [1995] 2 E.G.L.R. 32. It was held there that the landlords would not have been misled by the references to a wrong date both in the notice to terminate the lease and in the covering letter. Each document was expressly written pursuant to the particular break clause in the lease. The recipients would have observed the errors because they would be familiar with the terms of the lease and would have known that the only date of determination had to be 23 June 1995. They would know that there was no requirement to specify any date in the notice. They would see that the tenant wanted to leave. It was held that the notice was valid.

      In my opinion a like view should be taken in the circumstances of the present case. The notices were expressed to be "Pursuant to Clause 7(13)". It is plain from that that the tenant intended to invoke that clause. It is also plain that the tenant wished to determine the tenancy and that clause is the only clause under which the tenant could achieve that result. The landlord would be expected to know the terms of the lease and the date on which the lease fell to be determined under that clause. He would also be expected to know that there was no formal requirement for the tenant to specify in the notice the date of termination of the lease. There was no evident reason why the tenant should specify 12 January rather than 13 January. The close proximity of the 13th makes it the more evident that it was erroneous and that the date intended was the date which the parties had agreed for a determination of the tenancy under clause 7(13). While there is a discrepancy evident in the notices between the reference to the clause and the statement of the date it seems to me that the notices were sufficiently clear and unambiguous. No reasonable landlord would in my view be misled by the statement of a date which in the context of a clear intention to invoke clause 7(13) was inaccurate. The landlord would in my view recognise that in each case the reference to 12 January was to be read as a reference to 13 January and I would so construe the notices.

      In Hankey v. Clavening [1942] 2 K.B. 326 the court refused to disregard a slip even although the intention of the notice was sufficiently clear from its terms and the recipient could not reasonably misunderstand it. In my view that was too strict and too technical an approach. Counsel for the tenant sought to restrict the decision in Hankey to circumstances where the insertion of the date of termination is an essential requirement of a notice. I am, however, not persuaded that the decision in Hankey rested on the understanding that the specification of the date was an essential. I note that the corresponding provisions in Carradine and in Micrografix were not dissimilar and indeed in the latter case one element in the decision was the consideration that there was no requirement to specify a date. While to a considerable extent the cases in this field may turn upon their own circumstances I do not consider that the decision reached in Hankey was sound and in my opinion it should be overruled. In the circumstances of the present case I take the view that the notices were valid and effective. I agree with your Lordships that the argument based on Sidebotham v. Holland [1895] 1 Q.B. 378 is without merit. But for the reasons which I have explained I would allow the appeal.




© 1997 Crown Copyright


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