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Break Clauses North of the Border

By D

Batt Cables Plc v Spencer Business Parks Ltd [2010] ScotCS CSOH_81 (01 July 2010)

A new case on BAILII from the outer House of the Court of Session (approximately equivalent to the High Court).

Batt had rented an industrial unit from Scarborough Development Company (Glasgow) Ltd in August 1995 for a term running until August 2020. The agreement contained the following break clause:

Notwithstanding the foregoing…either the Landlords or the Tenants shall be entitled to terminate this Lease on the tenth, fifteenth and twentieth anniversaries of the Date of Entry. The foregoing entitlements to terminate shall only be exercised in terms of this clause by serving written notice to this effect on the other party no less than six months prior to the relevant termination date (time being declared to be of the essence).

There was also a provision relating to the appropriate method for serving a notice:

All notices which require to be given in terms of this lease shall be in writing and shall be deemed to be sufficiently given if sent by first class recorded delivery post addressed…in the case of the Landlords, to the Landlords (if a body corporate) at their Registered or Head Office…or (in either case) to such other address as the Landlords may have notified in writing, and any such notice shall be deemed to have been served forty eight hours after the date on which the same was posted (excluding weekends and public and statutory holidays). In proving service, it shall be sufficient to prove that the envelope containing the notice was duly addressed to the Landlords…in accordance with this Clause and posted to the place to which it was so addressed.

SBP bought the business park on which the unit leased to Batt resided in May 2008 and therefore became the landlords. Batt were informed of this assignment of the landlord’s interest in writing on the same day by SBP’s lawyers. Separately, Spencer Holdings Plc (SH), who were part of the same company group as SBP although a distinct legal entity, wrote to Batt setting out details of rent payment and alos giving contact details of various parties to deal with in relation to matters associated with the tenancy. One of these contacts was a Joe Dempsey whose details were supplied under the heading “Tenancy Issues – Rent Reviews, lease renewals, applications for landlords consent, occupation enquiries“.

In January 2010 the Finance Director of Batt wrote a letter to Joe Dempsey at the offices of SH giving notice to end the tenancy under the break clause on the fifteenth anniversary of the Date of Entry. The letter was sent by special delivery and was signed for at SH’s end. On the same date the letter was sent to the email address previously given for Mr Dempsey.

SBP took advice and their solicitors wrote to Batt in early February denying the validity of the notice on the basis that the letter was addressed to SH and not SBP. Batt also took advice and their solicitor responded that the only mandatory requirement was that the break notice be served on the landlord and not actually sent to them specifically. In other words service on SH as SBP’s agent was sufficient. As the Court put it, “the battle lines were drawn”.

The Court considered the English cases of Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 and Lay v Ackerman [2004] EWCA Civ 184, [2005] 1 EGLR 139. In Mannai it was held that a break notice giving the wrong date would not necessarily be invalid because of a minor error. The appropriate test was what a reasonable person would have understood by the notice. In Lay a counter-notice served by a landlord which misidentified the landlord survived on the basis of the same test. These cases have been interpreted in Scotland and while the position is accepted the Outer House (roughly equivalent to the Court of Appeal) has held in the case of Ben Cleuch Estates Ltd v Scottish Enterprise that a break notice which misidentified the landlord was invalid. In that case the Mannai test was never applied on the basi that the notice was simply improperly served.

Batt sought to distinguish Ben Cleuch on the basis that the decision in that case was not a general rule of law but was, in fact, based on the specific wording of the lease in that case which made the serving of a notice on the landlord an absolute requirement. This was not the case here. The Court did not accept this position and held that the decision in Ben Cleuch was indeed a general statement of the law. The Court distinguished Lay from Ben Cleuch and this matter on the basis that in Lay the notice was being served by the landlord on the tenant and therefore the error in the landlord’s name was of lesser import as it could not have caused misunderstanding.

However, the appeal was actually allowed on the basis that SBP had identified Mr Dempsey as their agent for the purpose of receiving notices as this was an absolute requirement for the fulfilment of his declared function. Therefore the notice was valid by being served on the agent of the landlord.

The law in England and the law in Scotland may not be absolutely in accord on this issue. There is some question as to whether a misstatement of the receiving party’s name or service at the wrong address would necessarily invalidate a break notice in England. Batt is only a mildly persuasive case in England and is not binding authority. However, it is a point to be aware of and it should be noted that while errors of dates can be forgiven (although not in relation to statutory notices so this has no application for section 21 notices) errors of names are less likely to be treated so lightly, especially in Scotland.

D is a solicitor specialising in landlord and tenant matters with a London firm.


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