Orchard (Developments) Holdings Plc v Reuters Ltd

This appeal concerns the effectiveness of a break clause notice under a lease. The tenant says that its notice was valid and effective to bring the lease to an end at its fifth anniversary, on 30 January 2006. The landlord says that the notice was ineffective and claims further rent on that basis. The judge, HH Judge Inglis, decided the issue in favour of the tenant, and so the landlord’s claim for rent failed. The landlord appeals.

The lease was of commercial premises at 55 Maid Marion Way, Nottingham. The premises were owned by Orchard (Developments) Holdings Ltd (“Orchard”) and were let under a lease dated 2 February 2001 for a term of 15 years from 31 January 2001. Orchard is the claimant in these proceedings and here the appellant. The original tenant was AVT Microsystems Ltd but there was an assignment dated 19 August 2004 to Reuters Ltd, the defendant and here the respondent (“Reuters”). The lease contained a break clause (clause 8.14) under which the tenant could terminate the lease at the end of the fifth or tenth year of the term by giving six months’ notice. That is what Reuters sought to do in late July 2005, at a time when it was also negotiating with Orchard concerning a rent review. It sent notices both by letter and by fax on each of 29 July and 30 July 2005. The judge found that the letters had been posted (by a process server) in the wrong letter-box and thus were totally ineffective. However, he held that the faxes, which were sent by Reuters and received on Orchard’s fax machine (at times when Orchard’s offices were closed) at 17.46 on Friday 29 July and 11.08 on Saturday 30 July 2005 retrospectively became effective notices when their receipt was “acknowledged” in writing for the first time in a letter dated 8 December 2006 sent by Orchard’s solicitors to Reuters’ solicitors and again in Orchard’s witness statements for trial which were dated 15 November 2007 and shortly thereafter exchanged.

The reason why the validation of the fax notices had to be retrospective was because it was common ground between the parties that under the notice provisions of the lease a notice by fax was not valid, or at best was only potentially valid, until its receipt had been acknowledged by Orchard. It therefore follows that the notices on the basis of which Reuters succeeded at trial below did not become effective until at earliest 8 December 2006: that is to say more than 16 months after the last day for serving a six months notice to break the lease, or more than ten months after the fifth anniversary’s break date itself.

In the meantime Reuters had vacated the premises by the break date and handed back the keys to Orchard, albeit under Orchard’s protests.

The break clause itself is to be found in clause 8.14 of the lease:

“8.14

If the Tenant shall desire to determine this Lease at the end of the fifth year or at the end of the tenth year of the Term and shall give to the Landlord six months’ previous notice in writing of such desire and shall on such determination deliver up the entirety of the Premises to the Landlord with full legal and physical vacant possession thereof THEN immediately on the expiration of such fifth year or tenth year this present Lease and everything herein contained shall cease and be void but without prejudice to the remedies claims and rights of action of either party against the other in respect of any antecedent claim or breach non-observance non-performance or non-fulfilment of the covenants stipulations and conditions herein contained”

The form of the notice required for such purposes was dealt with in clause 8.1 of the lease:

“8.1

Notices

8.1.1

All applications notifications consents approvals and notices under this lease must be in writing.

8.1.2

Unless the receiving party or its authorised agent acknowledges receipt a notice is valid only if it is given by hand sent by registered post or recorded delivery and served in accordance with clause 8.1.3.

8.1.3

Where the receiving party is a company incorporated in the United Kingdom effective service takes place at its registered office and otherwise in the case of the Tenant effective service takes place at the Premises and in the case of the Landlord or Surety effective notice takes place at that party’s address shown in this lease or at any address specified in a notice given by that party to the other parties.

8.1.4

Unless it is returned through the Post Office undelivered a notice sent by registered post or recorded delivery is to be treated as served on the third working day after posting whenever (and whether or not) it is received.”

For the purposes of this dispute, the critical words are those contained in clause 8.1.2, which makes it clear that a valid notice is either one which has been given by hand, sent by registered post or sent by recorded delivery and served in accordance with clause 8.1.3 or a notice given and/or served in some other way provided however receipt of such a notice has been acknowledged by the receiving party or its authorised agent; and no other. In the present appeal, Reuters relies on the second of those alternatives. Purely for convenience, the first alternative was described in oral argument as a “formal notice”, and the second alternative was described as an “informal notice”. A formal notice was effective by itself, subject to the one possibility that a notice by registered post or recorded delivery which was returned through the Post Office undelivered would fail in its effectiveness (clause 8.1.4), but that was because it could be independently proved that it had never arrived; but an informal notice could only be validated by acknowledgment of its receipt by or on behalf of the receiving party.

The judge held that such an acknowledgment was a notification within the meaning of clause 8.1.1 and therefore had to be in writing. There is no respondent’s notice against that holding.

Of course, by reason of clause 8.14, a notice, to be effective, also had to be received (subject to the clause 8.1.4 exception) prior to the start of the six months’ notice period.

In the early days of August 2001, soon after the dead-line for serving the break clause notice had passed, Reuters sought to obtain an acknowledgment from Orchard of receipt of the letters and/or faxes that had been sent. Mr Cridge, a partner in Reuters’ solicitors, gave evidence that his temporary secretary at the time had phoned Orchard’s office to ask for written confirmation of receipt. His witness statement exhibited the secretary’s attendance note of conversations she had had with individuals at Orchard’s office on 1, 3 and 4 August. The judge found that the evidence he had read and heard did not persuade him that there was an oral confirmation of receipt of the faxes. Therefore, even if he had held that a clause 8.1.2 acknowledgment need not be in writing, he was not prepared to find an oral acknowledgment.

On 8 December 2006, however, over 16 months later, Orchard’s solicitors replied to a letter from Mr Cridge in order to set out Orchard’s case in detail. Their letter began: “I now have my client’s instructions on this matter.” It continued:

“My client’s position remains that set out in Iain Davies’ letter to you dated 10 February 2006, namely that your client did not validly exercise its break right and that the lease dated 2 February 2001 is continuing. Neither my client nor its authorised agents have acknowledged receipt of a notice, whether served by facsimile transmission or otherwise…”

Nevertheless, two pages later, the following was also stated:

“In addition to claiming that the notices were served on the Friday and the Saturday, Denton Wilde Sapte faxed notices over to our client’s office timed at 17.46pm on 29 July 2005 and 11.08am on 30 July both times being when the offices were closed. Subsequently, our client received telephone calls from Denton Wilde Sapte on 3 and 4 August asking us or our client to acknowledge the faxed copies as evidence of serving. Clearly, Denton Wilde Sapte were concerned that the notices had not been served correctly within the required time scales.”

The judge found that the latter paragraph had acknowledged the receipt of the faxes and on that account held that Orchard had retrospectively validated Reuters’ informal notices by way of fax.

The judge also found that there had been a similar retrospective acknowledgment in three witness statements served by Orchard in the course of its proceedings. One was made by Marie Young, a secretary, who in the course of dealing with the events of late July and early August 2005 explained that when she arrived at Orchard’s office on Monday 1 August she did not see any letters but found the two faxes of the previous Friday and Saturday. Another was made by Trevor Killick, Orchard’s finance director, who said that on his arrival at his office on Monday 1 August he had been told by Marie Young of the two faxes. And the third was made by Desmond Wood, Orchard’s chairman, who said that he had learned of the faxes from Mr Killick on the same morning.

It was not alleged that disclosure of Orchard’s copies of the faxes themselves was an “acknowledgment of receipt” in writing, viz on the ground that stamped on these copies was Orchard’s own “Received” stamp stating that the faxes had been received on 1 August 2005. If Reuters’ case is correct, then such disclosure might well be said to be such an acknowledgment in writing.

The judge held that the solicitors’ letter of 8 December 2006 and the three witness statements of November 2007 were each an acknowledgment in writing of the receipt of the two faxes. He rejected a submission on behalf of Orchard that the time for any such acknowledgment had expired after the elapse of a reasonable time from the giving of such informal notices. He said:

“On the other hand, I think that it would be wrong to imply a term as to time. Unlike the deeming provision with registered post, no time is stipulated. If the recipient’s case is and remains that a fax was never received, there will never be an acknowledgment, and nobody will be able to say ever that notice by fax was valid. But where the fact of receipt is acknowledged in writing, I do not accept that it leads to absurd results for such acknowledgment to be relied on whenever made. The acknowledgment will always be after the event, and so will be retrospective. The purpose of the acknowledgment is evidential and, subject to the requirement of writing, informal, and if the truth is that the document is admitted to be received I do not think it matters when that acknowledgment is made. The document simply can’t be relied upon as valid unless acknowledged in writing…For the reasons given above, the Defendants succeed on the basis that effective notices to terminate the lease on 30^th January 2006 were served by fax on 29^th and 30^th July 2005.”

The judge also rejected a further submission made on behalf of Orchard: that the acknowledgments in question had been ineffective because, as to the solicitors’ letter and Marie Young’s statement, they had not been authorised to acknowledge receipt; and, as to all the acknowledgments, because the writers had not intended to acknowledge receipt. He held that Marie Young had ostensible authority and the solicitors and Messrs Killick and Wood in any event actual authority; and that even though the writers had not intended their statements of acknowledgment to have any legal effect, nevertheless they took effect in accordance with their terms.

On behalf of Orchard, Mr David Taylor has raised three issues: (1) Can an acknowledgment for the purposes of clause 8.1.2 be given beyond a reasonable time after service of the informal notices in question? (2) Were the alleged acknowledgments properly authorised? (3) Even if they were, could they be effective acknowledgments if not intended as such? To all three questions he submitted the answers were “No”. However, the only issue to which he devoted any real attempt to persuade was the first issue: for he accepted that at least Messrs Killick and Wood must have been authorised to say what they said in their witness statements; and that his third point was not his best. I need say nothing further about his submissions on issues (2) and (3). Issue (2) was conceded, his submission on issue (3) was unsustainable.

As to the first issue, he sought primarily to put it as a matter of an implied term, namely that there was an implied term of the lease that any acknowledgment of receipt, in order to be valid, had to be given within a reasonable time of receipt. He submitted that a reasonable time had certainly been exceeded once the time for the operation of the break clause, namely 30 January 2006, had been reached. It would also have been reached before then, when it had become too late for the tenant to find alternative premises.

In the course of that submission, however, he developed, with the assistance of the court’s probing, two further positions relating to the timing of any acknowledgment. One was that the latest time for any effective acknowledgment of receipt to validate an informal notice was the expiry of the time for giving a 6 months’ notice, viz by 30 July 2005. The other was that, in any event, it would be too late to validate an informal notice when once the fifth anniversary’s break point had come and gone.

For his part, Mr Nicholas Dowding QC on behalf of Reuters submitted that the judge had got the matter right, whichever version of Mr Taylor’s submissions might be considered. The provision for acknowledgment of receipt was purely evidential, and that element of evidence might be provided at any time before judgment. It was just like the Statute of Frauds, pursuant to which any form of memorandum might suffice to prove the contract, even a pleading in an action (see Megarry and Wade, The Law of Real Property, 5^th ed, 1984, at 577/8). Similarly, the notice had been provided in time, and all that was required was some evidence to prove it. In any event, there was no need for any implication, and the lease was well able to stipulate for reasonable conduct or a reasonable time when it wanted to (see clauses 4.9.3, 4.10.1/2, 4.11, 4.12.2 and 4.18).

Because of the way in which Mr Taylor’s submissions developed during the appeal hearing itself, the court allowed Mr Dowding a period thereafter, post hearing, to put in writing for us any further submissions he wished to make. Mr Dowding made good use of that opportunity (and Mr Taylor responded as well).

In those written submissions, Mr Dowding made or re-emphasised the following points. The effectiveness of even an informal notice dated from the time of its receipt, not the time of its acknowledgment. The acknowledgment was purely evidential, to establish (necessarily retrospectively) that the notice was received. It was not intended to affect what would otherwise be the effect of the notice. The reference in clause 8.1.2 to the notice not being “valid” unless receipt is acknowledged does not mean that the notice takes effect only from the date of the acknowledgment, but only that the notice cannot be relied on until receipt has been acknowledged. It is enough that the acknowledgment is given at any time before the dispute is finally determined by the court. The absence of any obligation to give an acknowledgment reflects the merely evidential aspect of the provision.

It is therefore erroneous to say that an informal notice given and received in time remains ineffective just because its acknowledgment falls beyond the six months’ notice period prior to the break date. Such a construction would remove the tenant’s unilateral right to break the lease by a proper notice. The critical date is when the notice is received, not any later date. Due receipt in time is the only mandatory requirement of an informal notice and the need for its acknowledgment is not part of the mandatory requirements of the clause. Such an interpretation is supported by the decision of this court in Yates Building Company Ltd v. R J Pulleyn & Sons (York) Ltd [1976] 1 EGLR 157 (CA), where it was held that an option to buy stated as being exercisable by a notice to be sent by registered post or recorded delivery but sent instead by ordinary post, but still arriving in time, was held to be validly exercised. Similarly here, to be “valid” a notice only had to be received in time: the rest was merely machinery for ascertaining receipt (and in the case of a notice sent by registered post or recorded delivery, the deemed time of its receipt).

Any other construction would remove the tenant’s clearly granted right to exercise his option to break by serving an informal notice: it would put it in the landlord’s power to destroy the option by waiting until after the start of the six months’ notice period to acknowledge the notice. And yet the draftsman must have intended to confer a right of some practical value. Moreover, there would be no rationale in a clause which validates an informal notice received in time just because of an acknowledgment given one minute before the start of the six months’ notice period, but invalidates an informal notice whose acknowledgment came one minute after that point. In any event the clause does not contain any provision relating to the timing of the acknowledgment, only relating to the timing of a notice. The clause does not, for instance, say: “Unless and until the receiving party or its authorised agent acknowledges receipt…”.Moreover, a provision designed to avoid uncertainty should not be construed so as to generate its own uncertainties, viz as to when any acknowledgment is given.

Further, clause 8.1, the notices clause, is a general clause which applies to all notices under the lease. There are many such notices provided for, some of which are necessary to impose a liability (for instance, to repair). To allow the receiving party to negate the imposition of that liability, or even to delay it, simply by declining or delaying to acknowledge receipt would be to cut across the entire scheme.

The point was not improved by not having been previously made on behalf of Orchard.

The same submissions applied to the alternative submission that it was in any event too late for an acknowledgment to work any effect once the break point had itself come and gone. Nor would any difficulty arise in practice. If, given an existing dispute as yet unresolved, the tenant remains in possession, then the break point option is forfeited in any event (see clause 8.14’s “If the Tenant shall…deliver up the entirety of the Premises…”). If, however, the tenant (as here) leaves in time, for instance because he relies on a formal notice (as Reuters did), then there is no reason why he cannot equally rely on an informal notice acknowledged in the course of subsequent proceedings.

In any event, there are other examples of the retrospective dying or reviving of contracts and even leases. Thus a forfeited lease may revive, if the tenant applies for relief against forfeiture. And a contract which has been repudiated depends for its existence on whether the innocent party accepts the repudiation.

It is common ground that there is no obligation to acknowledge an informal notice. It must follow in my judgment that there is no room for an implication of a reasonable time in which to acknowledge receipt of an informal notice. It is hard to imagine an obligation to do something within a reasonable time if there is no obligation to do that thing at all. It is not as if some doctrine of good faith required acknowledgment. For these reasons Mr Taylor represented the landlord’s choice whether to acknowledge or not as a form of option, and sought to assimilate cases where an option or election which may arise in certain circumstances has to be exercised within a reasonable time before it expires. However, it seems to me to be strange to think of an acknowledgment which need not be given as being like an option. The provision relating to the need for an acknowledgment is not giving an option to the landlord, but expressing a condition to which the tenant’s option to operate the break clause in an informal way is subjected.

On the other hand, it seems to me that the clue to the timing aspects of the notice provisions lies in the break clause itself, clause 8.14. That requires “six months’ previous notice in writing”. That is the one express requirement about the timing of such a notice. It ought to follow that only a notice in due form served at least six months before the relevant anniversary of the commencement of the lease’s term would be a valid notice. And that is confirmed by the terms of the notice clause, clause 8.1. That clause provides, by its sub-clause 8.1.2, that a notice is “valid only” in two circumstances: one is that it is “given by hand sent by registered post or recorded delivery and served in accordance with clause 8.1.3”; the other is “Unless the receiving party or its authorised agent acknowledges receipt of a notice”. In all other cases a notice or purported notice is invalid. Thus what I have described as a “formal” notice needs no validation from the landlord; but an “informal” notice does, for it is not effective unless acknowledged.

Mr Dowding, however, submits that such a construction would be contrary to the decision of this court in Yates v. Pulleyn. I have been unable to find any other similar case in relation to notice clauses. In Yates v. Pulleyn the clause provided as follows:

“The option hereby granted shall be exercisable by notice in writing given by or on behalf of Yates to Pulleyns or to Pulleyns’ solicitors at any time between April 6 1973 and May 6 1973 such notice to be sent by registered or recorded delivery post to the registered office of Pulleyns or of their solicitors.”

What happened was that the notice was sent by ordinary post on 30 April and was received by the solicitors on or before 4 May, ie in time. On the same day, 4 May, the solicitors replied, acknowledging receipt that day, but repudiating the notice on the ground that it had not been sent by registered or recorded post. Lord Denning said (at 157K):

“When a person makes an offer, he does sometimes prescribe the method by which it is to be accepted. If he prescribes it in terms which are mandatory or obligatory, the acceptance is only good if it complies with the stated requirements. Thus in the present case the notice of acceptance must be in writing, and must be given to Pulleyns or Pulleyns’ solicitors, and must be given between April 6 1973 and May 6 1973. But the question is whether the words “such notice to be sent by registered or recorded delivery post” are mandatory or directory…The distinction is this: a mandatory provision must be fulfilled exactly according to the letter, whereas a directory provision is satisfied if it is in substance according to the general intent…In applying the rule of construction, you must look to the subject-matter, consider the object to be fulfilled, and then see whether the provision must be fulfilled strictly to the letter or whether the substance of it is enough. So in the present case the question is whether the letter of acceptance must be sent by registered or recorded delivery post, else it is bad; or whether it is sufficient if it gets there in time, as, for instance, by ordinary post or by special messenger…Looking at the object of this provision, it seems to be this. It is inserted for the benefit of the buyer so that he can be sure of his position. So long as he sends the letter by registered or recorded delivery post, he has clear proof of postage and the time of posting. But if the buyer sends it by ordinary post, he will have no sufficient proof of posting, or of the time of posting. In that case, if the seller proves that he never received it, or received it too late, the buyer fails. None of these reasons apply, however, when the seller does receive it in time. So long as he gets the letter in time, he should be bound…”

Orr LJ agreed. Scarman LJ said (at 158H):

“Contractual provisions seem to me to be either obligatory or permissive, and the term “directory” – which is of course borrowed from the statute law – does not seem to me to be helpful in this context. I agree with the Master of the Rolls that the one question before the court is the interpretation of clause 2 of the option agreement. I read that agreement as requiring the option to be exercised by a notice in writing which is to be actually received by Pulleyns or Pulleyns’ solicitors. When later in the clause one comes to the words which have to be construed in this case “such notice to be sent by registered or recorded delivery post,” I think they are a clear indication, and are intended as such to the offeree, that if there is to be any issue as to whether or not the notice has in fact been received, he had better use registered or recorded delivery post if he wishes to put it beyond doubt. Of course, if there was any such issue, the burden would be upon the party seeking to exercise the option to prove that his notice has been received.”

In that case the provision for registered or recorded delivery post was regarded as being for the sole benefit of the buyer. One might have thought that it was for the benefit of both parties, in the event of dispute, and it was thus that the similar provisions for registered or recorded delivery post in the present case, even to the extent of the deeming provisions as to when if at all such methods of sending were to be regarded as effective, were presented by both parties to the court. In Yates v. Pulleyns, however, the reference to “such notice to be sent by registered or recorded delivery post” was regarded as evidential only, and not as a requirement of the validity or effectiveness of the notice. In other words those words were interpreted as though they had said: “and for the purpose of evidencing the timely receipt of the notice, it will be of assistance to the buyer to use registered or recorded delivery post [but he may use other methods of delivery]”. The question is whether a similar process of construction can be utilised in the present case.

What is remarkable about the present case, however, is the introduction into it of the words “is valid only”. The reader is told that it is only in certain situations that a notice is “valid”. That, in my judgment, is a provision which goes to essential validity, not evidence. Two situations are discussed. One is where the notice is given by hand or sent by registered post or recorded delivery. In the latter two cases (registered post or recorded delivery) such a notice is potentially valid but only if it is also served in accordance with clause 8.1.3. As for the timing of a notice by registered post or recorded delivery, that is dealt with by its own code in clause 8.1.4. In the case of a notice given by hand, which is not dealt with under clause 8.1.3 (or clause 8.1.4), I would regard the notice as requiring face to face delivery. It is not simply that the delivery must be by hand, but the notice must be given, and therefore to be effective, as is common ground, received, and I would say by hand. In such a case, which admittedly was not relevant to this appeal and not discussed by the parties, the circumstances of the giving and receiving of the notice will be mutual, and will provide their own certainty as to the timing of such a notice. That, in my view, is why a notice given by hand, although falling into that category of notice which has been referred to as a “formal notice”, is not otherwise provided for.

The second situation covered in clause 8.1 is a notice given by any other means, or what has been referred to as an informal notice (informal only in the sense that it has not been specifically provided for in clause 8.1.2). In such a case the effect of the clause is that the notice is not valid “Unless the receiving party or its authorised agent acknowledges receipt”. It is suggested that in such a case the acknowledgment of receipt is purely and merely evidential and does not enter into the formal validity of the notice. It seems to me, however, that it would be most odd if that were so. The case of an informal notice would be in stark contrast with that of the formal notice, where careful provision is made for obtaining certainty (in one way or the other) both as to the giving and receiving of the notice and as to its timing. Subject to further provision no other means of giving a notice will suffice. It will suffice, however, provided it is acknowledged. Clearly, the acknowledgment is vital. Without acknowledgment, the informal notice is as it were writ in water. It is potentially valid and effective, if given in time, but without acknowledgment invalid and ineffective.

If acknowledged, however, when does it become valid and effective? Mr Dowding says as of the time when it was given, because the provision is evidentiary only, and the acknowledgment relates back to the time the notice was in fact received. But the acknowledgment is not evidentiary only, but part of the essential validity of the notice. In such circumstances, there is much to be said for the conclusion that the informal notice only becomes valid at the time of its acknowledgment, which it is common ground must be in writing. A number of reasons lead me to that conclusion.

First, the notice by itself is not effective. If, therefore, it is to become effective subsequently because of an acknowledgment, then its effectiveness dates from a time later than its receipt. Where the timing of a notice is part and parcel of its essence (as it is under clause 8.14, but not under clause 8.1 itself), it is odd to think that a notice which only becomes effective too late (ie within the six months’ notice period) can nevertheless be an effective notice. In such circumstances, the acknowledgment is not merely retrospective in the benign sense that it is after the event of the notice itself, but it may be and in our case is retrospective in the important and strange sense that a notice which, before the acknowledgment, was ineffective to entitle the tenant to break the lease at the fifth year break point subsequently and after the beginning of the six months’ notice period becomes a good and effective notice.

Secondly, the acknowledgment is not said to require an acknowledgment of the time of receipt of the informal notice. So, an informal notice could be acknowledged without any certainty as to the date of its receipt. It might be said that an acknowledgment of the date of receipt is implicit in the language of acknowledgment itself, but that is not an easy argument. Clause 8.1 is not concerned with the timing of a notice, rather clause 8.14 is. Thus a notice might be acknowledged, even though the notice itself was out of time. It could not be thought that such a notice, even though acknowledged, was effective. This suggests that it is only an informal notice which has been acknowledged before the beginning of the six months’ notice period that is the subject matter of the clause. Alternatively, that the only acknowledgement which is relevant is the acknowledgement of a notice as a valid notice, which has never occurred.

Thirdly, the point of the exception in favour of an informal but acknowledged notice must be that it provides certainty to the parties. That would put such a notice in the same place as the formal notice which is given and received by hand and the formal notice which is given by registered post or recorded delivery and whose receipt is then the subject matter of the clause 8.1.3 and clause 8.1.4 code (which does not depend on the date of actual receipt). On Reuters’ case, however, the example of the informal notice which may or may not be acknowledged at some future time, with or without an acknowledgment of the date of its receipt, remains wholly at large. These considerations again suggest that it is only where an acknowledgment is given before the running of the six months’ notice period (or perhaps as acknowledgement of validity) that the parties have the necessary certainty which they are clearly searching for in their contract’s provisions.

Thus, as to Mr Dowding’s submissions: this case is not like Yates v. Pulleyn but materially different; it is not obvious that everything depends on the date of receipt of a notice (save in the case of a formal notice given by hand) except in the sense that a notice under clause 8.14 must of course in any event be given in time; the use of an acknowledgment leads the parties into deep uncertainties; there is no absolute right by a tenant to effect a break by a unilateral notice save under the conditions laid down in the lease; there is no reason why the notice provisions should not apply to other areas of the contract such as the duty to make repairs, but on the contrary it makes perfectly good sense that the obligation to make repairs should only arise once an informal notice is acknowledged. It is true that the clause does not say “Unless and until the receiving party…acknowledges receipt”, but that is exactly the sense of “Unless” (even on Reuters’ case) and is precisely how an informal notice to effect repairs would operate.

Therefore, in my judgment these clauses are intended to work as follows. An informal notice, if made and acknowledged in time, is a valid break clause notice; otherwise it is ineffective (unless perhaps the landlord subsequently acknowledges the notice as valid, which he may always do). If it is ineffective at the critical moment six months before the lease anniversary in question, it cannot be made effective within the six months’ notice period – which is not to say of course that a landlord may not, if he chooses, allow a tenant to leave and terminate the lease at any time. That, however, is not a matter of contract within the lease but of the parties’ autonomy, or of waiver. It matters not therefore that the landlord has no obligation to acknowledge an informal notice: the tenant retains the ability to serve a formal notice, at any rate until it becomes too late to do so. In the meantime the landlord may consider it businesslike to acknowledge an informal notice served in time in the realisation that, unless he does so, his tenant can always serve a formal notice. If, however, the tenant serves an unacknowledged informal notice and no formal notice, or he runs out of time to serve a formal notice, then he has only himself to blame, assuming no misleading on the part of the landlord.

Any other solution seems to me to involve the error that a notice which was invalid and ineffective at the critical moment six months before the relevant lease anniversary can be made valid and effective retrospectively merely by means of a later acknowledgment. Mr Dowding all but accepts that an informal notice which is unacknowledged is invalid, but he prefers to say that it is at any rate potentially valid, because it can be retrospectively validated by a later acknowledgment. That however begs the question. Moreover, where does the contract say that a notice can be validated within the six months notice period? The contract says nothing of the kind. It is simply an assumption.

The judge thought that retrospectivity was built into the very essence of the informal notice. He said, in the passage cited from his judgment above: “The acknowledgment will always be after the event, and so will be retrospective.” However, as explained above, that is not true retrospectivity, or is not a legally interesting retrospectivity. In what I regard as the archetypal case where both informal notice and acknowledgment come before the six months deadline the notice does not take effect from the moment of the notice’s receipt but from the time of its acknowledgment. There is nothing retrospective about that, for the six months deadline has not yet been crossed. Where, however, the tenant serves his informal notice right up against the six months deadline, so that any acknowledgment falls within the six months’ notice period, any validation of the notice would be retrospective, if Reuters were right, for the acknowledgment would as it were cross back over the six months deadline and validate the informal notice as from the time when it was first served. However, there is no need of such retrospective effect: again, that is the issue in the case and cannot simply be assumed or asserted. Any such assumption or assertion has to do battle with the single express contractual requirement found in clause 8.14 that a notice must be given at least six months before the break point, and with the requirements of validity built into clause 8.1.

Mr Dowding submits, nevertheless, that a contract which cannot be proved without a memorandum under the Statute of Frauds or section 40 of the Law of Property Act 1925 is similarly a contract which is validated retrospectively, sometimes a long time in arrears of the true agreement. In my judgment, however, that is not a true analogy. In the case of the Statute of Frauds (or any similar statute which requires a memorandum in writing) the underlying contract is made and complete and in existence as from the date of its making (and no other date): it is simply that it cannot be sued upon unless it can be proved in a particular way (“no action shall be brought…unless”). Thus such a contract is not void but only unenforceable: see Chitty on Contracts, 30^th ed, 2008, at para 4-041and the cases there cited. No question of deadlines or of retrospectivity usually arises in such a case. On occasion, however, it does, as where the memorandum relied upon post-dates the action itself. In such a case, the memorandum is too late (Lucas v. Dixon (1889) 22 QBD 357 (CA)), unless it predates the time when the party to be bound is joined to the action (Farr, Smith and Company, Limited v. Messers, Limited [1928] 1 KB 397 (Wright J)).

In the present case it is Reuters’ and the judge’s assumption of effective retrospectivity that has governed the width of the former’s submissions and of the latter’s judgment. If a later acknowledgment can validate a notice which was ineffective when given and can do so as at such notice’s original date, then there is in theory at any rate no limit to the effectiveness of such validation. However, I believe that assumption to be mistaken, for it leaps over the contractual deadline of a six months’ notice. However, on the facts of this case it is strictly unnecessary to decide whether the acknowledgements relied on are too late for that reason only.

For on the facts of this case ultimately the question which arises is whether a later acknowledgment can retrospectively validate an informal notice even after the effluxion of the whole of the six months’ notice period and the passing of the break date itself. The judge saw no difficulty with this, indeed there is nothing in his judgment to suggest that he considered separately and expressly whether his assumption of retrospectivity could be maintained even when there had, as in this case, been no relevant acknowledgment until after, indeed well after, the break point itself. He simply said: “I do not think it matters when that acknowledgment is made”. In my judgment, however, this case is a fortiori of the previous situation considered above. Clause 8.14 states that, where six months’ previous notice in writing had been given (and the tenant had left the premises) then “immediately on the expiration of such fifth year or tenth year this present Lease…shall cease and be void”. It continues: “but without prejudice to the rights remedies claims and rights of action of either party against the other…”. The effect of the judge’s judgment and of Reuters’ submission on this appeal is to tear up such provisions.

Thus, when the fifth anniversary, 30 January 2006, came and went, it was true that Reuters had vacated the premises, but there was as yet no valid notice to break the lease. Therefore, the lease did not come to an end and could not do so under clause 8.14 for another five years. It seems however that on Reuters’ case the lease could be retrospectively ended by an acknowledgment in the run up to or even in the course of litigation. I do not think that this is possible, and it would be destructive of all certainty. It would also run expressly counter to the “without prejudice to” part of clause 8.14, which preserved existing remedies, claims and rights of action. As of the break point date of 30 January 2006, Orchard would have had a continuing right to rent. If the subsequent acknowledgment could validate Reuters’ informal notice, the effect would be that the lease would come to an end after 30 January 2006 (albeit as of 30 January 2006) and would, contrary to the lease’s own provisions, destroy the right to rent that Orchard had as of that date. If, on the other hand, the lease is (albeit retrospectively) thought of as coming to an end as of 30 January 2006, there is the further oddity that an informal notice which at that time could not bring the lease to an end had been validated under the provisions of the lease after the lease had ceased and become void. In my judgment, such consequences show that Reuters’ solution is an impossible one.

Mr Dowding submits that in practice matters may yet work out satisfactorily, as here, where the tenant had vacated the premises in time (relying as Reuters did, but mistakenly, on the giving of a formal notice). In such a case, there is no reason why the tenant cannot rely on the serendipitous emergence of a late acknowledgment in the proceedings themselves. In my judgment, however, such a solution would be, for reasons given above, a recipe for disastrous uncertainty and would fly in the face of the provisions of clause 8.14.

Mr Dowding submitted that problems of certainty may always arise, even where a formal notice is served by hand or by registered post or recorded delivery. Indeed, that had happened in this very case where most of the trial was taken up with the disputed factual issue of whether the process server had posted the notices in the correct letter-box. Moreover, a notice served by registered post or recorded delivery may fail after the event, where it is subsequently returned undelivered through the Post Office (see clause 8.1.4).

In my judgment, however, it has to be recognised of course that there may always be uncertainty because of a dispute about past facts. It is the purpose of the litigation process and, if necessary, a trial to sort out such disputes. It is quite another matter, however, to build in a forever on-going uncertainty which depends on a future acknowledgment. As for clause 8.1.4, that indeed recognises an element of uncertainty, but it arises where a notice was never given for it never arrived. It is part of the deal whereby, in the absence of proof of return of an undelivered letter through the Post Office, a letter sent by registered post or recorded delivery will be deemed to have arrived at a certain date whenever and whether or not received. The purpose of such provisions is ultimately to resolve uncertainty by means of such a code.

Finally, I should mention Mr Dowding’s submission, at any rate in his written skeleton argument, and principally directed towards the issue of an implied term for an acknowledgment within a reasonable time, that clause 8.1 contemplates that a landlord served with an informal notice “will act in an honest and straightforward manner and acknowledge receipt, at any rate on request…There is nothing to suggest that the parties to the lease intended clause 8.1.2 to become a tactical weapon of this sort”. That is an attractive submission, and I would accept that the courts will generally be prepared to construe a contract in a way, if that is possible, which reflects commercial reality and honest dealing. Thus it may be that, if an informal notice is submitted in time for an acknowledgment before the deadline, there is an implied obligation, at any rate on request, to respond with reasonable promptness: so as to give necessary effectiveness to the contract. That, however, would be contrary to the common ground at the hearing of the appeal, that there was no obligation on the landlord to give or respond to a request for an acknowledgment within any period of time. But be that as it may, I think that such submissions are beside the point. The provisions regarding a break clause option are there for the tenant to operate, and he fails to operate them correctly and timeously at his peril. He has no reason to think that, if he fails to do so, he can rely on the landlord’s goodwill to save him. On the evidence, the parties were negotiating concerning a rent review in the period leading up to the six months’ deadline. No doubt those rent review issues were part of the overall factors which would determine what Reuters wanted to do. It served or tried to serve formal notices which would have protected it, but they went awry. It also served informal notices, but too late (at a weekend) even to ask for an acknowledgment in time. I do not think it can put the blame on Orchard. Its solution, to find and extract serendipitous acknowledgments, however much delayed, out of straightforward dealing with litigation, is in my judgment no solution at all.

It would seem that clause 8.1, which may have been drafted with Yates v. Pulleyn in mind, hardly does justice to the modern world of the fax and email. That, however, is another matter.

In sum, I would allow this appeal. I reject, however, Orchard’s primary solution which is to imply a term limiting the time for an acknowledgment to a reasonable time. In my judgment, it is the express terms of the lease itself which, properly understood, provide the solution. In fairness to the judge, he was only faced with the choice between such an implication and the argument that evidence could always validate retrospectively. The surest answer, however, is that it was too late for an acknowledgment when once the break point had passed. However, I also think, but it is unnecessary to decide, that the requirement of a six months’ notice means that certainty must be achieved before the six months deadline and that a notice which is invalid or not yet valid at that time cannot become effective merely because its receipt is acknowledged thereafter.

I agree with Rix LJ that this appeal should be allowed. I add a few words of my own only because I would found the decision on my opinion that, under this lease, a notice to terminate given by fax is only valid and effective if it is acknowledged before the six month notice period begins.

It seems to me that the words of the lease require that result. Clause 8.14 requires the tenant to give 6 months’ notice in writing of his desire to terminate the lease at the 5 or 10 year break point. Therefore, the question must be asked, at the start of the 6 month period: has (valid) notice in writing been given? Clause 8.1.2 provides that a notice given other than by registered post or recorded delivery or by hand (eg a notice delivered by fax) will only be valid if acknowledged by the receiving party or his agent. So, if the notice has not been acknowledged before the 6 month period begins to run, the notice is not valid and is not effective to bring clause 8.14 into operation.

It is common ground that the landlord is under no legal obligation to acknowledge the receipt of a notice. He might well have known for months that it was the tenant’s intention to give notice in time for the 5 year break point. He might well have received the faxed notice before the 6 month period began to run. Yet, this lease entitles him to do nothing, to give no acknowledgment, to allow the time for giving notice to pass and to stand on his right to keep the lease in existence. That might not be a very attractive thing to do but this lease allows it and the parties have contracted at arms’ length. Of course, there is nothing to prevent the landlord from waiving the requirement for a valid notice given in time. However, in my view, the legal position as between the parties is clear: a notice served by fax will be of no effect unless acknowledged by the landlord before the notice period began to run.

It follows that the basis of my decision is different from that of Rix LJ and Toulson LJ. However, the outcome is the same. I would allow the appeal.

I agree with Rix LJ that this appeal should be allowed on the ground that the documents relied upon by Reuters as acknowledging receipt of Reuters’ informal notice post-dated the expiration of the fifth year of the lease and did not have the effect of retrospectively terminating it.

By clause 3 of the lease, the landlord demised the premises to the tenant for the contractual term, which was defined in the lease particulars as fifteen years from and including 31 July 2001.

The contractual term was subject to the break clause (clause 8.14) set out in para 5 of Rix LJ’s judgment. The effect of this clause was that the lease would come to an end immediately on the expiration of the fifth year if the conditions set out in the clause were satisfied at that point of time. If not, it would continue (subject to any other agreement between the landlord and the tenant) until at least the expiration of the tenth year.

At the expiration of the fifth year of the lease the conditions on which the lease would then cease were not satisfied. Reuters had not given a valid notice of their desire to determine the lease. The requirements of a valid notice were set out in clause 8.1, and there had been no notice which fulfilled those requirements. So if anyone had enquired on 1 February 2006 whether the lease had ceased by operation of the break clause, the answer would have been negative. In my view the language of clause 8.14 in this respect is clear and does not admit of the argument that the lease could thereafter cease retrospectively as at the expiration of the fifth year simply by Orchard accepting as a historic fact that the informal notice had arrived at its premises after office hours on the evening of Friday 29 July 2005.

I am unimpressed by the argument of Mr Dowding QC that the court should be influenced in the construction of the lease by a comparison with the Statute of Frauds 1677 or later statutory variants. As Chitty observes (30^th Ed, 2008, Vol 1, para 4-009) the Statute of Frauds in practice worked badly and was, whenever possible, whittled down by judicial construction. I see no reason to suppose that the parties to the present lease intended to incorporate the body of decisions relating to the construction of that legislation into the interpretation of the provisions of the lease.

Nor am I impressed by the suggestion that after the expiration of the fifth year of the lease it may continue to exist, but only in a contingent form, subject to retrospective determination at any time if the tenant were induced or required, in the course of explaining its case why the break clause had not been validly operated, to set out the history including when the informal notice first arrived at its premises. As I see it, the expiration of the fifth year is a clear cut-off point, at which the lease either ceased or it continued; and, if the latter, the possibility of its termination under clause 8.14 was thereafter a thing of the past. On this issue I have nothing further to add to the reasoning of Rix LJ except that I agree with it.

We heard interesting arguments on the question whether an informal notice might become valid within the meaning of clause 8.1 by the tenant acknowledging receipt during the period of six months prior to the expiration of the fifth year of the lease. If, for example, in the early days of August 2001 Orchard had responded to Reuters’ request (referred to in para 10 of Rix LJ’s judgment) by sending the written acknowledgment which had been sought, I can see a good deal of force in Mr Dowding’s argument that this would have made the notice valid, but that is not what happened. It is therefore unnecessary to decide that hypothetical question and, there being some difference of judicial opinion between us on that issue, I would prefer like Rix LJ not to express a definite view. It is a point which arises on the specific wording of a lease which has not been particularly well drafted, and I do not see it as a point of law of general importance.