Siemens Hearing Instruments v Friends Life Limited

 

The Message

The law will seek to let justice triumph over technicalities.

The Case

In yet another break notice dispute, the Court has reached a decision based on the merits rather than a failure to follow the exact procedure required In 1997, Friends Life agreed to let to Siemens premises in Crawley for a term of 25 years from 24 August 2008 but subject to a right on the part of the tenant to break the lease after 15 years. The right to break was subject to giving vacant possession as well as paying all rent up to 23 August 2013 and 6 months additional rent. The lease completed in 1999 in the agreed form.

In addition, the lease provided that any break notice must be expressed to be given under Section 24 (2) of the Landlord and Tenant Act 1954. The purpose of this requirement was to stop the tenant serving a break notice and then applying for a new tenancy at a lower rent. At the time of the agreement to let, it was feared a tenant could lawfully take such a step but it was determined by the Court of Appeal in 1998 in the Garston case that this was not possible.

When the break notice was served in 2012, it made no mention of S.24 (2) of the Landlord and Tenant Act 1954. Notwithstanding that the provision was now meaningless following the Garston case, and the intention and effect of the notice was clear, Friends Life  argued the notice was invalid and ineffective.

As probably any landlord would have done, Friends Life sought to prevent the break by relying on established case law that break conditions and requirements must be strictly followed come what may. In response, Friends Life argued that the requirement was now meaningless and/or any failure in procedure was not fatal to a notice if it did not actually affect the landlord.

A lot was at stake as the rent was now £325,000 per annum and there were rates and insurance on top and another 10 years of the lease to go if the break was ineffective.

The Court first held that the provision to refer to S.24 (2) was not meaningless and had not been superseded even though there was no longer any need for this requirement. It was simply a requirement of the lease that fell to be complied with.

However, the case turned on what was the effect of non-compliance with this requirement? The lease made no express provision in this respect and, while a failure to pay the rent or give vacant possession by the break date would have been fatal, it did not follow that a failure to give notice in the right way would be.

The Court considered that, in the absence of any express provision saying non-compliance would invalidate the notice, the law was flexible regarding non-compliance with both statutory and contractual requirements as to notices even where, as here, the lease stated that the notice must be served in a particular way. In particular, the law would consider what the effect of non-compliance would be? The law would look to the substance, not the form.

In this case, the Court held the notice to be valid in the absence of any express provision providing otherwise and because the failure to use the specified wording made no difference at all. Accordingly, the wording was dispensable and its use was not mandatory. Clearly, in the Court’s view, such an interpretation led to a much fairer result.