Hexstone Holdings Ltd v AHC Westlink Ltd

A contractual break right must be exercised by the tenant or by an agent whose authority is established. A notice given by a third party as principal is invalid, even if the recipient might understand that the tenant intended to terminate. Subsequent ratification cannot cure a notice that was invalid when given. A general agent may serve a break notice in its own name, but clear evidence is required to establish such an agency. The reasonable-recipient approach applies to the meaning conveyed by a notice, not to the separate question of whether it was given by the correct person.

The claimant landlord granted the defendant tenant an underlease containing an option to determine the term on 31 October 2009, subject to specified pre-conditions and six months’ written notice. A notice was sent on the notepaper of Eddie Stobart Limited and stated that it was given for and on behalf of that company, although the underlease remained vested in AHC Westlink Limited.

The landlord sought declarations that the underlease continued and payment of rent and other sums. The tenant counterclaimed for a declaration that the term had ended. The central issues were whether the notice was given by the tenant or an authorised agent, whether any agency or later ratification could validate it, whether the notice communicated the required information under the contractual test, and how the timing wording in the break clause should be construed.

1. Notice invalid. The notice was given by Eddie Stobart Limited as principal. It was not given by AHC, and there was no evidence that AHC itself had decided to exercise the break right. The notice therefore did not comply with clause 7.1 and did not determine the underlease.
2. Agency. A general agent may give a valid break notice in its own name without disclosing the agency, but such an unusual relationship requires clear evidence. Payment of rent and occupation do not, without more, establish authority to terminate the tenant’s estate. AHC had neither pleaded nor proved a general agency. It also failed to establish express or implied authority for Eddie Stobart Limited or Mr Nixon to serve the notice.
3. Ratification and notice construction. Subsequent ratification cannot turn a notice that was bad when given into a valid notice. The distinction identified in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd between the formal identity of the giver and the meaning conveyed by the notice was material. The reasonable-recipient test could not make a notice given by an unauthorised third party a notice given by the tenant.
4. Alternative reasoning. Even if authority had existed, Hexstone could not safely have treated the notice as binding on AHC. The different company registration number on the notepaper created uncertainty as to whether there had been an assignment, whether Eddie Stobart acted as principal, or whether it purported to act for AHC. The court also rejected the proposed construction that the notice had to be given on 30 April 2009 only. If otherwise valid, the notice would have been within the required six-month period.
5. Order. The underlease continued for the remainder of its term. The monetary claims were to be addressed consensually in accordance with that conclusion.

Not an appeal. The judgment itself records no prior appellate decision.