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A costly break up

If a tenant paid rent due on the quarter day in full because he was uncertain that on that date he could meet the preconditions required to exercise the break clause,

...but duly did so thus terminating his lease, can he recover the proportion of rent already paid in respect of the period between the break date and the last day of the quarter by implying such a term? No, said the Court of Appeal in Marks and Spenser PLC v BNP Paribas Securities Services Trust Company (Jersey) Ltd and anr [2014] EWCA Civ 603.The break clause permitted M&S to terminate its lease on 24.01.2012, if certain preconditions were met. M&S duly complied, but had already paid the rent for the quarter starting on 25.12.2011. When the break clause was exercised, M&S sought repayment of the rent paid for the period 25.01.2012 to 24.03.2012. There was no express term in the lease entitling M&S to repayment.

The test laid down in AG of Belize v Belize Telecom Ltd [2009] 2 All ER 1127 remained good law, namely “...what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?...”. If no express term existed, the starting point was that none should be implied. A term would not be implied unless it was necessary to realize the parties’ express agreement, purposively construed against the admissible background.

The case law in this area formed part of the admissible background against which M&S’s lease was to be interpreted. On balance, a reasonable person, having knowledge of this background, would conclude that if the parties had really intended there to be an implied term for repayment they would have made express provision for it.

Further, reliance on the words “proportionately for any part of a year” in the reddendum of the lease could not be relied upon as a basis for implying the desired term. Those words were applicable to a payment of rent for a broken period within the original term of the lease. If on the last quarter day there was uncertainty that termination would occur on the break date those words were inapplicable.

Elizabeth Dwomoh / 1st Jun 2014


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