Summary

Time was of the essence in relation to the service of a tenant's counter-notice under a rent review clause which deemed the reviewed rent to be that specified in the landlord's trigger notice if such a counter-notice was not validly served. Mecca Leisure Ltd v Renown Investments (Holdings) Ltd (1984) 49 P&CR 12 was wrongly decided.

Facts

Appeal by the defendant landlord from the decision of Neuberger J by which he declared that a counter-notice served by the claimant tenant in purported pursuance of the terms of a rent review clause was not out of time, since time was not of the essence, and further declared that the reviewed rent was consequently not to be deemed to be that specified in the landlord's trigger notice. The trigger notice was served on 30 March 1999 specifying a new rent of £84,800 per annum. The rent review clause provided that the tenant should serve any counter-notice (the effect of which was to require the parties to endeavour to agree the new rent, failing which the matter was to go to arbitration) within one month of receipt of that notice, failing which the tenant was deemed to have agreed to pay the rent specified in the trigger notice. The counter-notice was not served until 16 June 1999. The landlord contended that the counter-notice was out of time, such that the amount of the reviewed rent was, therefore, conclusively and finally determined by the deeming provision. The tenant contended that time was not of the essence in relation to the service of the counter-notice, relying upon the majority decision of the Court of Appeal in Mecca Leisure Ltd v Renown Investments (Holdings) Ltd (1984) 49 P&CR 12. Neuberger J held that Mecca (supra) was indistinguishable on its facts, save as to the wholly inconsequential difference over the period within which any counter-notice was to be served, and that despite the considerable judicial and academic criticism of the majority decision in that case he was bound to follow it.

Held

(1) Mecca was wrongly decided. The point of principle in Mecca had been considered by the Court of Appeal in an earlier decision, Henry Smith's Charity Trustees v AWADA Trading & Promotion Services Ltd (1984) 47 P&CR 607, where precisely the opposite conclusion had been reached. The basis upon which AWADA (supra) had been distinguished in Mecca was erroneous and involved an unwarranted departure from that which had been established in United Scientific Holdings Ltd v Burnley Borough Council (1978) AC 904. (2) As a consequence, the court was bound to follow AWADA. Where the parties had clearly stipulated the consequence of no proper notice being served within the specified period, that was a contraindication rebutting the presumption that time was not of the essence. It followed that the landlord was entitled to declarations that the tenant's counter-notice was void and of no effect and that the reviewed rent was deemed to have been agreed in the sum of £84,800.

Appeal allowed. Declarations accordingly.