On words we rely…it’s not to imply

December 16, 2015

The Supreme Court ruling in the case of Marks & Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and Another [2015] is a timely reminder of the importance of using specific, unequivocal words in lease documentation – and in particular, in the drafting of a break provision.

The case concerned a claim by Marks & Spencer for a refund of rent and other sums it had paid its landlord in advance for a period falling after the date it terminated its lease pursuant to a break option. Under the lease, the rent (together with insurance and car parking charges) was payable quarterly in advance. Exercise of its break option was conditional upon M&S being up-to-date with its rental payments. M&S paid its December 2011 quarters’ rent and having exercised the break, the tenancy ended on 24 January 2012 (and therefore part way through the quarter).

M&S then brought an action against its Landlord claiming that even though there was no express wording in the lease which provided for a refund of the rent and other sums paid in advance for the period from 24 January 2012 to the end of the quarter, a term should be implied that they were entitled to a refund having terminated the tenancy.

At first instance in the Chancery Division, Justice Morgan ruled that the court could imply such a term. That Landlord appealed, the Court of Appeal reversing the decision and holding in favour of the Landlord. M&S then appealed to the Supreme Court which upheld the decision of the Court of Appeal. Delivering the leading judgement, Lord Neuberger ruled that neither common law nor statute implied that rent payable in advance was apportionable on the basis that M&S contended. In delivering his judgment he cited the 1900 case of Ellis v Rowbotham in which the Court of Appeal held that the Apportionment Act 1870 was not applicable to rents payable in advance, but rather only to payments in arrears. Significantly, he went on to highlight that the lease negotiations between the parties were conducted against a background understanding that rent payable in advance was not capable of apportionment. There were no specific words in the Lease that provided for apportionment in the circumstances of the exercise of the break where rents beyond the break date had already been paid. Given this background understanding and the position under common law and statute, it was correct, he said, that no such apportionment term was to be implied into the lease.

The case provides a stark and timely reminder of the importance of not only making sure that leases are drafted to cover such eventualities, but also that clear unequivocal wording is used to achieve a party’s aims and deliver the requisite protection.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice.

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