Case: United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904
Outcome: discussed
In the primary judgment, I made the following comments in relation to this issue: "In determining what orders may be appropriate, the parties may wish to consider the applicability of the principles laid down in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 (" United Scientific Holdings ") in relation to the retrospective application of rent reviews completed outside the period provided for under the lease. In United Scientific Holdings , the House of Lords held that there was nothing in that case that displaced the presumption that strict adherence to the timetables specified in the relevant rent review clauses was not of the essence of the contract. There were in fact two separate cases decided in United Scientific Holdings . The first involved a rent review on a 99 year lease. The review was to occur each ten years after the commencement of the lease, with the new rent to commence on 31 August of that year. The rent review mechanisms provided that the revised rent was to be determined by agreement, or failing agreement, by arbitration "during the year immediately preceding" the 10 year period to which that rent would relate. By the end of the first 10 year period, such agreement had not been reached, and nor had the matter been referred to arbitration. The second case involved a 21 year lease, commencing upon 8 April 1968. The rent was to be reviewed every seven years. The relevant machinery provided for the lessor to serve a notice on the lessee, and the lessee to serve a counter-notice accepting the proposal or making a counter-offer. The parties were then to negotiate. If agreement had not been reached after a certain time, the lessor was required to appoint an independent valuer. In this case, the lessor's notice was served within time. However, no agreement had been reached by the parties, and the lessor failed to appoint an independent valuer within the time provided for under the lease. In both cases the House of Lords held that time was not of the essence in relation to the clauses in the leases which the lessors had not complied with. The lessors had not lost the opportunity to have the rent for the next rental period reviewed by virtue of not complying with the time periods set down in the rent review machinery clauses. The potential significance of the case for this proceeding in terms of any final orders that may be made is as follows. The House of Lords held that once the relevant terms were complied with (namely an arbitration concluded in the first case and independent valuation conducted in the second case), the new rent would be payable from the date that the lease provided that the new rental period was to commence. That is, despite the lessors' tardiness, not only did they maintain their rights to rent reviews, but once the rent reviews were completed, the revised rent applied retrospectively as if those reviews had been completed on time." 20 The first respondent relies on United Scientific Holdings to assert that the further notice operates retrospectively back to 1 March 2003. To the extent that it is necessary, it seeks leave to file an amended defence and cross-claim so as to seek the appropriate declaratory relief to this effect. The declarations sought are that the further notice is valid, and that the rental for the period commencing 1 March 2003 is that which will be determined in accordance with the rent review machinery in the lease (namely the amount assessed as the proper rent by the independent third party). 21 The applicant objects to the Court granting the first respondent leave to file and serve an amended defence and cross-claim. It submits that it has informed the first respondent since early 2003 that it rejected the validity of the notice, yet the first respondent did not seek to protect its rights by issuing a provisional further notice. The applicant contends that the first respondent has provided no explanation as to why it did not take this course or plead the issue of its entitlement to do so. 22 The applicant submits that the first respondent is now seeking to implement the rent review machinery relating to independent third party assessment of the proper rent to be paid, despite having rejected the applicant's offer to take this course on 20 March 2003. At that time, the first respondent rejected the applicant's offer because the first respondent asserted it was entitled to the amount specified in the notice by reason of the applicant not objecting in time, and therefore the first respondent was not bound to submit to any third party assessment of the rent. 30 In addition to United Scientific Holdings , the first respondent relies upon the decision of the New South Wales Court of Appeal in GR Mailman &amp; Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 per Gleeson CJ as authority for the proposition that time is presumed not to be of the essence in relation to the right to invoke a rent review. These cases acknowledge that the presumption is rebuttable by sufficient "contra-indications" in the lease itself or the surrounding circumstances.