Case: Amalgamated Estates Ltd v Joystretch Manufacturing Ltd (1980) 257 EG 489
Outcome: discussed
In support of this contention, the first respondent submitted that the notice closely resembled the rent review notice in Amalgamated Estates Ltd v Joystretch Manufacturing Ltd (1980) 257 EG 489 (" Amalgamated Estates "). That notice was in the following terms: "Dear Sirs, Re: 14 Regent Street and 3 Bank Street, Rugby. Pursuant to the terms of your Lease of the above premises dated December 7 1973, we hereby give you notice that we require a review of the yearly rental payable thereunder as from December 10 1978. We specify that the new rent payable as from December 10 1978 will be [sterling]10,000 per annum exclusive. This rent is proportionally in line with our recent lettings and reviews of other premises in the area with similar accommodation. Please would you kindly acknowledge safe receipt of this notice by signing the enclosed copy notice and returning it in the stamped addressed envelope provided." 82 The notice in Amalgamated Estates was upheld as being valid. I shall return to Amalgamated Estates , and whether the reasoning in that case is applicable to the present proceeding later in these reasons for judgment. 83 The first respondent contended that the only substantive requirement of clause 3.2.2 is that the lessor subjectively assess the "proper rent for the premises" as defined. There is no requirement that this assessment be objectively "reasonable". 84 The first respondent relied upon a number of cases with comparable rent review clauses to support the proposition that all that the landlord must do is specify its subjective assessment of the rent it is up to the tenant to object. 87 The first respondent also relied upon Amalgamated Estates in relation to the claim that the notice did not comply with the substantive requirements of clause 3.2.2. In Amalgamated Estates the obligation was to pay "open market rental". The rent review clause (clause 3(a)) provided that "open market rental" was first to be determined in the following manner, namely: "specified in notice in writing signed by or on behalf of the Landlord and posted ... to the Tenant at the demised premises..." 88 The lease then provided for the lessee to serve a "counter-notice" if it objected to the rent specified by the landlord in the notice. In that case, Lawton LJ, with whom both Templeman LJ and O'Connor LJ agreed, stated at 491: "There are two questions, therefore, for decision in this case: (1) should there be implied into clause 3(a) of the proviso words to the effect set out in the defence, namely, that the sum specified by the landlords should be a bona fide and genuine pre-estimate of the open market rental value? ... As to the first point, I have no doubt at all that the words which, it was submitted, should be read into clause 3(a) cannot be so read. The proviso deals with definitions and procedure. Clause (1) of the proviso provides that the open market rental must be a rent which might reasonably be demanded by a willing landlord, etc. Clause (3) sets out how that reasonable rent is to be fixed and it is to be done in three stages. First, the landlord is to specify his figure; then there are to be negotiations for an agreement if his figure is not at once accepted. That is clear from clause 3(b). If there is no agreement then there is to be arbitration. It is after all those steps have been taken that a reasonable rent is to be ascertained; and I can see no room at all in this lease for implying that the figure specified by the landlord must start with a bona fide and genuine pre-estimate of the rent." 89 Similarly, Templeman LJ stated at 493: "The first point made by Mr de la Piquerie for the tenant is that there must be an implied term that the landlord will only specify a bona fide and genuine pre-estimate of the open market rental value. That appears to me to be an unnecessary and unworkable proposition. If a landlord puts forward a preposterous figure for rent, the tenant can always serve a counternotice. It would be ludicrous if the court were obliged to decide whether the landlord's figure was a bona fide and genuine pre-estimate in order to decide whether the landlord's request for an increased rent was valid or wholly void. The court does not exist to punish a landlord for being greedy, especially as the definition of "greed" varies from Shylock to Portia and from landlord to tenant." 144 The cases relied upon by the first respondent as upholding notices in a similar form are, in my view, distinguishable from the notice in this case. The first respondent placed particular reliance upon the notice that was upheld in Amalgamated Estates . That notice was in a much clearer form than that in the present case. The relevant clause in the lease required the landlord to specify the open market rental by notice in writing. The notice stated: "Pursuant to the terms of your Lease of the above premises dated December 7 1973, we hereby give you notice that we require a review of the yearly rental payable thereunder as from December 10 1978. We specify that the new rent payable as from December 10 1978 will be [sterling]10,000 per annum exclusive." 145 Moreover, the validity of the notice in Amalgamated Estates was not challenged on the basis of its form, but rather on the basis that the landlord had not specified a bona fide and genuine pre-estimate of the open market rental on the property in question.