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P&O Property Holdings Ltd v International Computers Ltd (1998)

Summary

A clause providing for the suspension of rent where demised premises were so badly damaged as to be unfit for occupation did not apply to sums reserved by way of additional rents.

Facts

Summons issued pursuant to RSC O.14A by the plaintiff landlord ('P&O'), seeking determination of whether reference to "the rent" appearing in the rent suspension clause of a commercial lease included the amounts payable by the defendant tenant ('IC') under the lease by way of additional rents. Various floors of an office block were extensively damaged by a bomb explosion. It was common ground that, for an agreed period of time ('the damage period'), the floors let to IC ('the demised premises') were rendered unfit for occupation or use. Clause 6 of the lease provided that in such event "the rent hereby reserved or a fair proportion thereof...shall be suspended until the demised premises have been rendered fit for occupation or use by the tenant". The reddendum provided for IC to pay, inter alia, "...as additional rents the amount payable by the tenant...in respect of insurance, service charge, repairs or otherwise...". Whilst the parties were agreed that payment of the rack rent was suspended by clause 6 during the damage period, the issue was whether the amounts payable under the lease by way of additional rents were also suspended. IC argued that reference in clause 6 to "the rent hereby reserved" was a reference back to the reddendum, from which, it was claimed, it was clear that that expression extended to all amounts payable by IC, and in particular the insurance and service charge.

Held

(1) The expression "the rent hereby reserved" in clause 6 was ambiguous, and it was by no means clear that it referred to the various components of rent and additional rents referred to in the reddendum, since the reddendum itself contained references to both "rent" and "additional rents". (2) There was no consistency of approach by the draughtsman of the lease as to the use or meaning of the expression "rent". Accordingly the construction of clause 6 fell to be established not as a dry academic exercise but in the context of a commercial agreement between two substantial bodies. (43) On that basis, P&O's construction was to be preferred, since: (i) it took account of the use of both "rent" and "additional rents" in the reddendum and elsewhere; (ii) it resulted in a system that was commercially fairer and easier to implement, particularly given that P&O was obliged to insure the demised premises during the damage period; and (iii) it seemed that under the lease IC had its remedy elsewhere, in particular in the scheduled provisions allowing P&O's surveyor to adjust the amount of the service charge to take account of the fact that IC derived no benefit or advantage from any particular service.
Declaration accordingly. Leave to appeal granted.

Chancery Division
Neuberger J
Judgment date
7 December 1998
References

Practice areas