In the current economic climate, we are all too familiar with industrial action taken across many service industries, including postal services. The ‘new norm’ appears to be a general uncertainty as to whether letters will be delivered on time, if at all in some instances.
This state of affairs has potentially far-reaching implications for commercial landlords and tenants, in particular, in connection with the service of notices. The point came to a head in a recent decision by Sheriff Reid at Glasgow Sheriff Court in Lujo Properties Ltd v Gruve Ltd – the full judgement available here.
The facts
The action concerned a commercial lease. The landlord contended the lease had been terminated by irritancy following service of pre-irritancy notice and a further irritancy/ termination notice upon expiry of the relevant notice period. It sought declarator that the lease had been validly terminated on that basis.
The tenant contested the validity of the pre-irritancy notice, arguing that service had not been effected, the notice having never been delivered to/ received by the tenant. In fact, the notice had been returned to the landlord undelivered some 3 days after posting. Of particular note was the fact the landlord, despite being aware the notice had not been delivered, opted not to disclose this to the tenant. Indeed, the tenant was not aware the pre-irritancy notice had been issued at all until the landlord purported to terminate the lease.
The decision
Finding in favour of the tenant, the Sheriff held that the notice had not been validly served in accordance with the lease. In reaching this determination, the Court made various observations, including the following:
1. Service under the 1985 Act
Under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 there is an irrebuttable presumption that a pre-irritancy notice that was properly addressed, pre-paid and posted in compliance with section 4(4) thereof is deemed to have been served on the day of posting.
2. Service at common law
Under the common law, delivery (i.e. actual receipt) of a contractual notice was required for service to be effected, subject to a rebuttable presumption (an assumption made by a court that is taken to be true unless someone proves otherwise) in favour of receipt. Said presumption could be rebutted by evidence that the notice had not in fact been received.
3. Service under the lease/ contract
The rebuttable presumption (see 2 above) at common law could be displaced by agreement of the parties in terms of the wording of the relevant contractual provisions.
The lease in question provided that to effect irritancy, the landlord must have “first given written notice” (emphasis added). The Court concluded that the word “given” should be read as meaning actual delivery/ receipt.
The lease further provided the notice would be deemed to have been duly served three days after the date of posting if sent by recorded delivery post.
Notably, this prescribed mode of service did not preclude service being effected by other means.
Moreover, the Court held that whilst the relevant provision created a presumption that the notice had been served (so long as it ‘ticked’ the relevant boxes), it did not create an irrebuttable presumption. Proof that notice had not been “given” (in this instance, interpreted as delivered/ received) could overturn the presumption and render the notice invalid.
4. Oppression
The plea of oppression – that a landlord had acted improperly, misused or abused its right to terminate the lease by irritancy – was narrow in scope but could be (and was in this instance) sustained in circumstances where:
the tenant had not received the notice;
the landlord was aware of that fact; and
the landlord failed to intimate the notice or disclose the fact it had been issued by other available means.
In the present case, the fact the landlord had open lines of communication with the tenant and the parties had been corresponding in connection with the breach underpinning the notice for several weeks was relevant.
Comment
The Court’s decision in Lujo Properties serves as a stark reminder to both landlords and tenants that there are seldom any guarantees when it comes to the service of notices under commercial leases. In an area of law already plagued with uncertainty, the decision arguably introduces an additional layer of doubt, exacerbated by the unreliability of the postal service.
Furthermore, the Court’s clarification on the plea of oppression may serve as a disincentive to parties who may seek to rely on deemed service provisions in circumstances where they are aware notice has not strictly been ‘given’ (i.e. received/ delivered) but choose not to disclose this to the other party in pursuit of a ‘technical knock-out’.
As is always the case, the decision emphasises the need for careful and precise drafting and, indeed, interpretation of contractual provisions. Legal advice should be sought at the earliest opportunity any time a notice requires to be served under a lease (including, rent reviews, break options, termination or enforcing breaches).
It remains to be seen whether the decision will be appealed and the pertinent legal issues considered by a higher court. However, what is clear is that this will not be the last time contentious issues in the context of contractual notice provisions come before the courts.
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Article published 23 February 2023.