When is it ok to get it wrong?
The context of this article is firmly in the peculiar world of the Landlord and Tenant Act 1954, but the principle can apply just as well to other areas of law. In a recent case in the London County Court, the court didn’t like the parties using technical errors to further their cause. The court was not happy that the claimant tenant criticised the defendant landlord for potentially using tricks of the trade whilst at the same time using tricks of the trade themselves. The court ultimately focussed on what they felt the parties should have done to deal with the matter reasonably and objectively. The court decided it was “ok to get it wrong”.
Turning to the details of the case, it related to an unopposed lease renewal of office premises in Mayfair. The landlord served a s.25 notice which ended the existing statutory lease and gave terms for a new lease. The terms offered by the landlord to the tenant were not favourable. The notice was prepared by the landlord’s solicitor, but it was incorrectly addressed. The tenant was Dukeminster (UG) rather than Dukeminster Limited. The landlord’s solicitor missed the “UG” in addressing the notice (along with other statutory documents). Both Dukeminster companies were controlled by the same directors, and both companies had been tenants of the lease at various stages during the term.
The tenant claimed that the landlord’s solicitor had deliberately mis-addressed the notice as a tactic to try and force the tenant’s hand. The tenant suggested that the landlord might try to seek to claim their notice was invalid at a later stage so they could change tactics if it was to their benefit. The directors tenant thought that the landlord was seeking to avoid an opposed lease renewal, which usually ends up with a tenant receiving significant compensation (unlike an unopposed lease renewal).
The court liked none of it. The judge held that the tenant’s directors were all property professionals who knew full well the tactics that can be employed in dealing with lease renewals. They had used some of these tactics themselves (by serving a s.26 notice as late as possible to improve their position on interim rent). Ultimately, the court held that the tenant’s arguments failed, and the notice was valid.
There has not been much comment on this case. Most cases talk about the vital importance of getting technical documents right first time, and they tend to get more publicity by the traditional law firms. It may be that practitioners don’t want to comment on a case which says you can get something wrong and it still be ok, as telling everyone that you need a lawyer to get the technicalities right for you is usually what they want their clients to hear. But in my view this case is not just about a few missing letters on a statutory notice. This is a wider line of reasoning about dealing with matters proportionately. This is a county court decision but as so few lease renewal cases come to court it is a useful commentary on how the court views lease renewal matters.
The judgement is focussed on the reasonableness of the tenant’s reaction. There is a long line of cases on what a reasonable recipient of a notice should understand by it, but I think this case takes that line of reasoning further. My view is that the court felt that once the error was established the tenant needed to not only point it out to the landlord but then deal with the matter objectively and not try to profit from the situation, or indeed read too much into what had happened. Therefore, this decision is less about whether the notice was valid but more about the county court wanting parties to engage in effective negotiation with the other party, rather than rack up large legal bills on technical points. Which should apply regardless of the area of law you are dealing with.
Finally, as part of the lease renewal process, the court then decided the terms for the new lease which (unusually) included an upwards and downwards rent review provision. Most landlords require upwards only rent reviews in negotiated leases, but the judge said “I can see no compelling reason to depart from what, in my judgement, inherent fairness dictates” in granting an each way review. In my view this is another indication of how the court’s jurisdiction and inherent desire to promote fairness is wider than current market trends or standard practice.
Overall, a trusted advisor should help you take a wide view of the matters in issue rather than the bunker mentality that litigation can encourage. The parties would all have been better off if they did not end up in court.
Dukeminster Ltd v West End Investments (Cowell Group) Ltd CC (Central London) 21/19/2018
For more advice these issues please contact Jen Morris, Dispute Resolution & Debt Recovery, Real & Construction Partner at gunnercooke
DD: 07508 352570