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Decision in Vanquish Properties (UK) Limited Partnership v Brook Street (UK) Limited [2016] EWHC 1508 (Ch)

In this case, in which Guy Fetherstonhaugh QC and James Tipler appeared for the successful Defendant, Chief Master Marsh was asked to rule on the validity of a purported break clause notice.

The Claimant, a Limited Partnership, claimed that it had on 22 March 2016 been granted an overriding lease of premises held by the Defendant at 108 Fenchurch Street, London EC3 (part of the proposed Leadenhall Triangle development) thus placing it (or so the Claimant asserted) in the position of immediate landlord of the Defendant. In that capacity, the Claimant, through its solicitors, served notice on the Defendant, also on 22 March, purporting to terminate the Defendant’s lease pursuant to a break clause allowing such termination with effect from 27 September 2016, on 6 months’ notice.

The Defendant contended that the overriding lease could not have vested in the Claimant (since Limited Partnerships cannot hold property, having no legal existence); and that it could not have vested in the partners either (for the reason that there were five such partners in the Partnership; that s.34 of the Law of Property Act 1925 stipulates that where land is conveyed to more than four people in such circumstances, it vests in the first four named; and that this provision cannot operate where, as in the case of the lease, no partners were named).

That being so, the Defendant went on to contend that the purported break clause notice was either invalid from the outset because it did not comply with a provision in the lease requiring it to be served by “the Lessors”; or alternatively was invalid on the footing that the reasonable recipient would have been left in real doubt as to the provenance and effect of the notice.

The Claimant raised arguments to the contrary, claiming that the lease was vested either in the Partnership; or in the first four partners named in the partnership documents; or in the General Partner of the Partnership. The Claimant maintained that it was obvious that the break clause notice had been served on behalf of one of those entities; and that since the Claimant’s Solicitors had been authorised both by the Partnership and by the General Partner to serve the notice, then it followed that the notice had been properly served and was effective, even if there had been a mistake in the naming of the entity which was competent to give a valid notice.

The Chief Master gave judgment in favour of the Defendant. First, agreeing with the Defendant’s submissions, he held that the lease could not have vested either in the Partnership or in some combination of its partners. The consequence was that the Claimant could not validly have given the notice. Secondly, although he did not agree that the notice had been invalidated by the failure to effect service “by or on behalf of the Lessors”, he held that it would not have been clear to the reasonable recipient that the reference to the partnership should have been a reference to the General Partner. 

The decision is another salutary reminder of the warning given by Lewison LJ in Siemens Hearing Instruments Ltd v Friends Life Ltd [2014] 2 P & CR 5 concerning the importance of observing the formal contractual requirements if a break clause notice is to be safely depended upon to do its job.

The judgment can be found here

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