The test for deciding whether a failure to include specified information in a notice is critical, say Guy Fetherstonhaugh QC, Wayne Clark, Joe Ollech and Mark Galtrey.
Face it: who does not experience that twinge of anxiety when filling out a form online? Most of the time, a prompt will highlight a “required ground” we have missed, and no harm is done: we can go back and insert the postcode. At the worst, you may miss your flight – but there will always be another.
Notices in leases
But when it is a notice we are completing, nerves of steel and bags of competence are needed, in order to produce something that will not then be capable of successful challenge. Readers of EG are familiar with the mass of litigation concerning the interpretation of break clause notices given under leases, where the penalty for non-compliance may be further unwanted years on the hook.
To a certain extent, the harshness of the law concerning the interpretation of such notices was softened by the decision of the House of Lords in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] PLSCS 150. But, while Mannai will allow a court to adopt a kindly attitude to a mix-up over dates in a notice, it will not come to the rescue of those who have used blue paper for the notice, if the clause had said pink paper must be used (to borrow Lord Hoffmann’s example); or where the notice required apparently useless information to be included, which the drafter had omitted (see the decision of the Court of Appeal in Siemens Hearing Instruments Ltd v Friends Life Ltd [2014] EWCA Civ 382; [2014] 2 EGLR 41).
Statutory notices
So much for leases. What of the interpretation of notices required to be given under statute? Here, too, because of the often unfortunate consequences of non-compliance (a missed enfranchisement; an unlawful eviction), there has been much litigation, out of which some principles may be drawn.
The latest decision to emerge from the Court of Appeal concerns the conjoined appeals in TFS Stores Ltd v Designer Retail Outlet Centres and others [2021] EWCA Civ 688; [2021] PLSCS 92, in which TFS (incidentally the defendant to the rent claim/Covid-19 defence litigation on which I reported in my last article: Commerz Real Investmentgesellschaft mbH v TFS Stores Ltd [2021] EWHC 863 (Ch); [2021] PLSCS 74) applied to court for the grant of new tenancies of retail premises it occupied. Its landlord opposed the claims on the ground that TFS’s tenancies were not protected by Part II of the Landlord and Tenant Act 1954. TFS contended however that the contracting out procedure laid down in section 38A of the 1954 Act and Schedule 2 of the Regulatory Reform (Business Tenancies) Order 2003 had not properly been followed.
Section 38A(3) provides that a contracting out agreement shall be void unless the landlord has served on the tenant a notice in a specified form, and the tenant has made a declaration in prescribed terms, or terms substantially to that effect. The prescribed form of declaration contains spaces for the insertion of the name of the declarant, his address, the address of the premises and the date on which the term will commence. The issue on the appeal was whether the way in which this last entry (“for a term commencing on…”) was completed meant that the declarations were not “in the form, or substantially in the form” prescribed, with the consequence that the parties’ purported contracting out from the security of tenure provisions of Part II of the 1954 Act was void.
In some of the cases before the court, the declarations simply provided for the term to be (a term commencing on) “the date on which the tenancy is to be granted”. TFS contended that this was meaningless, and did not give any effect to the statutory requirement. In other cases, the declarations stated that the term would commence on “the Access Date under the Agreement for Lease pursuant to which the tenancy of the premises will be entered into”. In these cases, TFS contended that the access date was a historic date, with the lease in each case having been executed many months later, with the result that the terms could only commence in law from that later date – thus making the declared term commencement date demonstrably false.
The trial judge did not agree with TFS, and neither did the Court of Appeal. Each court accepted, by reference to extrinsic materials such as the House of Commons Regulatory Reform Committee report dated 11 December 2002, that the purpose of the proposals for reform which introduced the contracting out procedure was to make the renewal or termination of business tenancies quicker, easier, fairer and cheaper, by removing the need for an application to the court, while providing “all necessary protection” for tenants by ensuring “that the tenant has the best possible chance of appreciating the significance of agreeing to exclude his rights under the Act”. Nowhere in any of the materials before the court was there any discussion of the purpose to be achieved by the requirement to state in the declaration to be made by the tenant in response to the landlord’s warning notice, the date on which the proposed term was to commence.
These observations led the way to the court’s rejection of TFS’s case that the specification of a term commencement date was a critical part of the contracting out process. The court adopted the approach to statutory construction posed by Lewison LJ in Pollen Estate Trustee Co Ltd v Revenue & Customs Commissioners [2013] EWCA Civ 753; [2013] PLSCS 146. The court must have regard to the purpose of a particular provision and interpret its language, so far as possible, in a way which best gives effect to that purpose. In seeking that purpose, the interpreter is not confined to a literal interpretation of the words, but must have regard to the context and scheme of the relevant Act as a whole. The essence of this approach was to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of elements intended to operate together) answered to the statutory description.
Applying that approach, although it was plain that the declaration was required to state the term commencement date, and that this had not been done at all in some cases, the requirement was not an essential part of the statutory purpose. If, in the circumstances, the way in which paragraph 1 of the declaration as a whole is completed leaves no room for doubt as to the lease which is the subject of the declaration, its essential purpose will have been fulfilled. TFS had been given enough information to appreciate the security of tenure it would enjoy, and any failure to follow through the declaration requirements did not affect that appreciation. Accordingly, there was no reason why the declaration should not be completed by inserting a formula such as “from a date to be agreed”, provided that the declaration read as a whole is sufficient to identify the lease in question.
The court observed, in addition, that completion of the declaration was a matter for the tenant (although in practice this may be done by the landlord), and that, when the landlord has done all that it is required to do by serving a warning notice in proper form, it was an unattractive submission on the part of a tenant to say that it had filled in the blanks in the declaration in a way which invalidates the parties’ agreement.
However, in an echo of Lord Hoffmann’s blue and pink paper example of a requirement that might have to be met, Lord Neuberger noted in The Chiltern Railway Co Ltd v Patel [2008] EWCA Civ 178; [2008] 2 EGLR 33 that the statutory requirements in relation to a notice or a declaration could be so clearly and unequivocally expressed that strict compliance would be required, and that any deviation, however insignificant, from those requirements would render a purported notice or declaration invalid. This, though, was not such a case.
The required approach
Practitioners henceforth must consider whether the declaration fulfils “all the essential purposes” of the prescribed form. If so, then despite the use of apparently mandatory language, parliament is not to be taken to have insisted on an interpretation that is contrary to commercial sense. Prudent practitioners will of course attempt to comply with the mandatory language, rather than take their chances in court.
Guy Fetherstonhaugh QC, Wayne Clark, Joe Ollech and Mark Galtrey are members of Falcon Chambers
