Edstaff Ltd v Anglo Overseas Group (Properties) Ltd

A contractual term suspending provisions governing termination must ordinarily be construed according to its objective wording. Where the wording is neutral and the original termination clause operated mutually, the suspension applies to both parties unless the agreement clearly provides otherwise.

An advance payment made for a longer licence period, particularly where accompanied by a discount, may secure the licensee’s continued occupation while also securing the licensor’s right to retain the fee. The licensee cannot treat the arrangement as preserving an unilateral right to leave early and recover the unused fee.

A licensee paid an advance fee for occupation of premises until 30 June 2006. The parties later exchanged communications concerning the advance payment, including a term that the licence provisions concerning termination would be suspended during the relevant period.

The licensee left on 31 March 2006 and claimed repayment of the fee for the remaining three months. The district judge upheld the claim, construing the arrangement as waiving the owner’s right to terminate while preserving the licensee’s right to give notice. The circuit judge dismissed the appeal. The owner sought permission for a second appeal on the construction of the revised arrangement.

The central issue was whether suspension of the termination provisions operated mutually or only against the owner.

1. Permission and disposition. The application for permission to bring a second appeal was granted and the appeal was allowed. The lower courts’ construction of the revised arrangement was demonstrably untenable and therefore provided a compelling reason for the Court of Appeal to intervene.
2. Construction of the revised arrangement. The term concerning suspension of the licence’s termination provisions was objectively neutral. The original provision operated mutually, and its suspension therefore affected both parties. It could not reasonably be construed as removing only the owner’s right to terminate while preserving the licensee’s right to give one month’s notice.
3. Commercial effect. The arrangement secured the licensee’s right to occupy until the end of the agreed period, but prevented earlier departure with recovery of the prepaid fee. Correspondingly, it secured the owner’s right to retain the fee for that period, while preventing eviction or termination before then. The discount had been granted in return for the longer licence period and did not support a unilateral refund right.
4. The Court rejected reliance on a further letter introduced into the appeal bundle for the first time. It was too late to rely on that material without an application to adduce fresh evidence, and the owner had not explained its absence from the proceedings below.
5. The circuit judge’s dismissal of the appeal was replaced by an order allowing the appeal from the district judge and dismissing the claim for repayment. The separate counterclaim was not displaced.

• Court of Appeal (Civil Division): In [2008] EWCA Civ 243, permission for a second appeal was granted and the appeal was allowed.
• Liverpool County Court: On 8 February 2007, His Honour Judge Mackay dismissed the appeal from the district judge.
• District Judge Sykes: On 6 September 2006, judgment was entered for the licensee’s repayment claim, subject to a small counterclaim by the owner.