Quirkco Investments Ltd v Aspray Transport Ltd

A landlord may demand insurance rent under a lease only for sums already paid in insuring the premises, where the lease refers to sums expended on insurance. A tenant’s failure to comply with an absolute monetary condition in a break clause, including a trivial shortfall, prevents the break from taking effect. Rent payable in advance is not apportioned merely because the lease subsequently ends, unless the lease provides for that result. On a summary judgment application, the court may determine a short point of construction where the evidence is sufficient, but factual issues requiring trial remain.

Quirkco Investments Ltd, the landlord, sought declarations that its commercial lease with Aspray Transport Ltd continued and claimed rent arrears. Aspray had served a notice exercising a break clause, but the clause required there to be no arrears and no material outstanding breach at the termination date.

The landlord applied for summary judgment under CPR Part 24 and for judgment on, or striking out of, the counterclaim. The central issues were whether an insurance charge had been validly demanded, whether other alleged breaches affected the break, whether the demand was defective in timing, whether any arrears were de minimis, and whether rent paid in advance was recoverable after termination.

1. The application for summary judgment on the landlord’s claim was not finally determinative of the lease, because alleged repairing breaches remained triable. The construction issue could nevertheless be decided under CPR r. 24.2 because the relevant evidence was before the court and the parties had addressed it fully. The court applied the approach summarised in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339.
2. On the natural construction of clause 2.3, the landlord could demand the Insurance Charge only for sums already paid in insuring the property in accordance with clause 5.1. The landlord’s payment to the broker was neither received nor paid to the insurer, and the premium was not paid until 15 December 2010. The demand was therefore invalid and created no liability for insurance rent before expiry of the break notice.
3. The court would have rejected the argument that failure to use reasonable endeavours to note the tenant’s interest or obtain a waiver of subrogation necessarily prevented recovery of a properly paid premium where the insurance cover complied with clause 5.1.1. That conclusion was unnecessary to the result.
4. The timing objections to the demand would also have failed. The invoice was sufficiently clear, and the lease’s 14-day payment period applied to the demand even though the invoice requested payment on receipt.
5. Clause 6.11.2.1 imposed an absolute condition precedent requiring that there be no arrears. Such conditions had to be strictly performed. The de minimis principle could not assist in relation to the admitted arrears of £3,609.72, and a trivial breach would in any event ordinarily preclude exercise of an option expressed in absolute terms. The validity of the break still depended on the unresolved repairing issues.
6. The counterclaim for repayment of rent attributable to the period after the alleged termination was struck out. Rent payable in advance was due in full on the quarter day. Neither the common law, the Apportionment Act 1870, nor unjust enrichment required time apportionment after subsequent termination. The claim for repayment of money paid by mistake disclosed a possible cause of action and had to proceed to trial.