Patel & Ors v MRD Property Developments Ltd

A contractual requirement that insurance rent be paid after a written demand does not ordinarily require a formal letter or prescribed wording. Where the lease specifies no formalities, the question is objective: would a reasonable recipient, considering the contractual and commercial context, understand the document as requesting payment of the insurance rent? The purpose of writing is to provide a lasting and certain record of the amount due and avoid confusion. An insurer’s renewal notice identifying the policy and premium may therefore constitute a valid demand when supplied by the landlord. The tenant’s subjective awareness of the requirement is irrelevant. The approach applied the commercial construction principles in Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd [1997] AC 749.

The appellants were tenants under a lease requiring insurance rent to be paid within 14 days of written demand. After rent arrears accrued and the premises were destroyed by fire, the landlord served notice under the lease and re-entered the property. The tenants sought a declaration that the lease had not been forfeited or, alternatively, relief from forfeiture.

At Central London County Court, Mr Recorder Stephen Jourdan QC held that the landlord was entitled to forfeit the lease but granted relief on terms. He found that insurance renewal notices supplied by the landlord’s secretary to one tenant constituted written demands. The appeal concerned that conclusion. The landlord also relied on waiver, while the tenants sought permission to add a late ground concerning service on joint tenants.

1. Appeal dismissed. The Recorder reached the right conclusion for the right reasons. The insurance renewal notices constituted valid written demands under clause 4.2 of the lease, so the insurance rent was properly due.
2. Clause 4.2 required the insurance rent to be paid within 14 days of written demand, but prescribed no particular form or wording. A letter from the landlord expressly requesting payment would satisfy the clause, but it was not essential. Any written document would suffice if, viewed objectively, a reasonable recipient would understand it as a demand for payment of the insurance rent.
3. The construction was governed by the commercial context. Applying Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd [1997] AC 749, the court considered the relevant objective contextual scene, the understanding of a reasonable commercial person, and the purpose of requiring writing. That purpose was to provide a lasting and certain record of the amount payable and avoid confusion. The tenants’ actual awareness that a written demand was required was therefore immaterial.
4. The renewal notices identified the property-owner policy, policy details, renewal date and premium, and named the landlord as policyholder. They were the best evidence of the insurance premium paid or payable by the landlord. A reasonable tenant would understand that the notices were supplied so that the tenant could reimburse the landlord. The fact that nothing explicit was said when the documents were handed over did not alter that conclusion.
5. Permission to add a late ground concerning service on the three joint tenants was refused because the point had not been taken below and might have required further evidence. The court declined to determine the landlord’s alternative waiver and estoppel argument because, following its conclusion on written demand, it was hypothetical and unnecessary. Lords Justice Longmore and Patten agreed with Lord Justice Ward.

• Court of Appeal (Civil Division) [2012] EWCA Civ 727: unanimously dismissed the appeal.
• Central London County Court: on 18 July 2011, Mr Recorder Stephen Jourdan QC held that the landlord was entitled to forfeit the lease but granted relief from forfeiture on terms.