Obligation to pay rent in advance; break clause; estoppel

In PCE Investors Ltd v Cancer Research UK ([2012] EWHC 884 (Ch)) C had granted a lease to P. The lease contained a break clause. One of the pre-conditions to the effective exercise of the break right was that the tenants must have paid the rent due up to the ‘Termination Date.’ Rent was payable quarterly in advance on the usual quarter days. The tenant served a notice on the landlord exercising the break right. The landlord served its demand for the rent due on the next quarter day. The demand sought the entire rent due for the next quarter even though the tenant’s notice, if effective, would bring the lease to an end before the end of the quarter. The tenant proffered rent calculated on a daily pro rata basis from the relevant quarter day to the Termination Date specified in its notice. It invited the landlord to confirm that its calculation of the rent due was correct but the landlord did not respond. The landlord then argued that the tenant’s notice exercising the break right was ineffective since only part of the rent due on the quarter date had been paid. The tenant responded that it was only liable to pay the amount due on a pro rata basis up to the date of termination. It also sought leave to amend its pleadings to include a plea that the landlord’s silence in the face of the tenant’s request for confirmation amounted to a representation that the calculation was correct and that the landlord was estopped from resiling from that representation.

Peter Smith J. made the point that each lease, and indeed each contract, has to be construed in the light of the objective intention of the parties to it and that decisions concerning similar words in other contracts, indeed even other leases, are of limited help. He concluded that there was no reason to depart from the plain words of the lease which required the full quarter’s rent to be paid in advance ([35] and [54]). He refused leave to introduce the estoppel point. In any event, he thought that there was nothing in it. The landlord had made no representation since it had received the tenant’s notice at the time it demanded the full quarter’s rent ([85]). The request for confirmation could not impose a duty on the landlord to comment ([86]). There was no evidence as to why the tenant believed it had only to pay rent on a pro rata basis; it refused to disclose the legal advice it had received ([91]). If there was a representation / belief it was as to the law rather than as to a fact ([96]). There is no ‘general proposition that where one party perceives the other side is making a mistake they have a duty to correct it.’ ([104]).

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