I qualified as a solicitor 30 years ago today and to celebrate the Supreme Court has handed down what is being trumpeted as a major landlord and tenant judgment but which in reality doesn’t change the law in the area at all! The case of Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another does however demonstrate the fact that just because you think that your interpretation of the law and facts in a dispute is reasonable does not mean that it is the correct one especially if your opponent has a similarly reasonable interpretation of the same facts.
The facts are in fact fairly simple. M&S had an office building known as The Point in Paddington, London which it leased from BNP Paribas. In July 2011, M&S served a break notice terminating its lease and giving up possession on 25 January 2012. However, in common with most leases, 25 December was a rent payment day on which M&S had to pay three months’ rent and service charge. When the break operated, the effect was that M&S had paid rent for the period until 25 March 2012 although for two months it had not occupied or even had a lease of the building. As the amount in question came to £1.1 million, M&S tried to recover the amount that it claimed to have overpaid.
Although they succeeded in the High Court, both the Court of Appeal and the Supreme Court rejected the argument that there should have been an obligation implied in the M&S lease requiring BNP to give back the rent for the two months after M&S had left the building, despite the contract not specifying this.
If this sounds harsh, it is worth remembering that it would have been possible for the lease to have had a clause requiring the rent to be apportioned when the lease came to an end but it did not. As a result, the case fell to be decided on the well-established principle that rent payable in advance, is not apportionable by reference to time. Rents payable in arrears are apportionable by virtue of statute but this does not apply to rent payable in advance. The court held that a term will only be implied into a contract if it satisfies the test of business necessity or it is so obvious that it goes without saying. It is not sufficient to imply a term simply because it appears fair or the parties would have agreed it if it had been suggested to them.
This is in fact the second case of this nature in recent months. In the case of Arnold v Britton and others given on 10 June 2015 (a case involving service charges levied on holiday chalets which increased by 10% a year), Lord Neuberger said that the duty of the court when interpreting a written contract is “to identify the intention of the parties” and it does so “by focussing 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…”
In simple terms, if you strike a bad bargain, don’t expect the courts to rewrite its terms in your favour.
In the light of the Arnold case it is surprising that M&S continued with their claim against BNP but perhaps they felt that they might as well continue since there had recently been a tendency for the courts to apply a notion of commercial common sense to agreements which seemed unfair. That approach has now been firmly sat on.
The case is in fact wider in its significance than just in the property arena. Essentially the Supreme Court is severely limiting the circumstances in which it will intervene to “correct” an unbalanced contract and also the terms which it might be willing to imply.