Prudential Assurance Co Ltd. v Exel UK Ltd & Anor

A break notice must clearly and unambiguously communicate that the person entitled to exercise the break right is determining the lease. The notice is construed objectively, by reference to the lease, its wording and the relevant background reasonably available to the parties. A mistake as to identity will not invalidate a notice if the mistake is obvious and the recipient can safely rely on the notice. Authority to serve a notice does not itself cure an ineffective notice. Estoppel requires an assurance or common assumption addressing the relevant legal right, reliance and resulting unconscionability or detriment.

Prudential granted a lease of commercial premises to Exel UK Limited and Tibbett & Britten Consumer Group Limited as joint tenants. The lease contained a tenant’s break right. Solicitors instructed through the group’s Property Department served a notice referring only to Exel, although both companies remained tenants.

The claimant challenged the notice on authority, construction and estoppel grounds. The defendants contended that the Property Department had authority to instruct the solicitors, that the notice should objectively be read as being given for both tenants, and that Prudential was estopped from denying its validity.

1. Authority. The Property Department had authority, either expressly or by assent to an agency relationship, to deal with group property matters and instruct solicitors. Its established role, the circulation and operation of the Guidelines, the group’s settled practice and the particular instructions concerning the premises established authority to act for both defendants. The solicitors’ failure to identify the true tenants did not itself remove that authority.
2. Construction. The notice had to be construed objectively by reference to the break clause, the notice and the contextual background reasonably available to the parties. It had to communicate clearly and unambiguously that the tenant was exercising the break right. The relevant background was not confined to the lease and notice.
3. The notice expressly stated that the solicitors acted for Exel alone, while the lease identified both Exel and Consumer as tenants. The background intensified rather than removed the resulting doubt. It included the continued existence of Consumer, its dormant subsidiary status, earlier correspondence in which the solicitors acted for both companies, later correspondence and pleadings asserting that Exel alone was the lessee, and the careful identification of the lease and its original parties in the notice. A reasonable recipient could not safely conclude that Consumer had merely been omitted by mistake. The notice was therefore ineffective.
4. The authority to serve a notice did not validate a notice defective on its face. The circumstances differed from Havant International Holdings Ltd v Lionsgate (H) Investment Limited, where the error was confined to a name and the surrounding circumstances made the intended giver clear.
5. Estoppel. Neither promissory estoppel nor estoppel by convention was established. The communications did not amount to an assurance or common assumption that Exel alone could exercise the break right despite Consumer’s continuing tenancy. The solicitor who drafted the notice acted on his own mistake, not in reliance on Prudential’s communications. There was consequently no relevant reliance, detriment, unconscionability or change of position.
6. The court concluded that the solicitors were authorised to serve the notice, but that the notice was ineffective and Prudential was not estopped from denying its validity. Further submissions on relief were reserved.

First-instance decision. The judgment records no appeal or earlier decision in the same dispute.