Commercial approach to interpreting lease provisions

United Kingdom

T Grimes v Trustees of the Essex Farmers & Union Hunt [19 May 2017]

Summary

The Court of Appeal adopts a commercial approach to the interpretation of a notices provision in a lease.

Facts

An agricultural tenancy agreement provided that any notice may be served on a party to the agreement “at the address given in the Particulars [in the agreement] or such other address as has previously been notified in writing”.

The evidence showed that the tenant had given written notice to the landlord that he had changed his address. Some 6 years later, the landlord served a notice to quit at the tenant’s original address given in the Particulars. The tenant claimed that he knew nothing about the notice as it was served at the wrong address.

The issue was whether the landlord had validly served its notice to quit and, therefore, whether the agreement had validly terminated.

Decision and analysis

Perhaps surprisingly, the judge at first instance held that the notice had been validly served. The original address was still a valid address for service, because the agreement allowed for the notice to be served at the address given in the Particulars, even though the landlord had many years earlier received a notice of the tenant’s change of address. The judge considered that the literal meaning of the words was clear.

The Court of Appeal disagreed and held that the notice had been invalidly served and, therefore, the agreement had not been validly terminated. This is the common sense outcome.

The Court adopted principles of construction from the well-known Supreme Court decision in Arnold v Britton [2015]. 

"When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. And it does so by focusing on the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions."

And more recently in Wood v Capita Insurance Services Ltd [2017], the Supreme Court said "The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning."

It would be surprising if it was open to the landlord to serve a notice on the tenant’s old address after he had been notified of the new one. As a matter of commercial common sense, the parties must have intended that the new address, once duly notified, should supersede the original address given in the Particulars. If that was not so, an unscrupulous landlord who knew that the tenant had moved, could continue to send notices to the old address years after he had moved on and long after any normal arrangements for the forwarding of mail would have expired. If the landlord had not been duly notified of the change in address, he could continue to serve at the old address, even if he knew the tenant was no longer there.

In interpreting the agreement’s wording, as a matter of ordinary language, there was a rebuttable presumption that service would be either at the original address or at such other notified address, but not both. The parties could not have sensibly intended that there should continue to be the option of serving at the old address once notice had been given that there was a new address. The use of the word “other” (shown in bold in the notice provision above) was a strong indication that the new address was intended to replace that given in the Particulars. To construe the clause in this way did not involve reading anything into it and it was the natural and ordinary meaning of the language used.

The critical point was that the wording had to be considered in the context of the agreement as a whole and it was not "a literalist exercise focused solely on a parsing of the wording of the particular clause".

The Court’s sensible approach to interpretation will be broadly welcomed.