High Court of Ireland Decisions

THE HIGH COURT

Record no.: 2023/341SP

[2025] IEHC 80

IN THE MATTER OF AN APPLICATION PURSUANT TO ORDERS 3(1), (2), (4), (6), (7), (20) AND/OR (22) AND ORDER 83(1) OF THE RULES OF THE SUPERIOR COURTS

 

Between:-

TOM O'BRIEN

Plaintiff

-and-

DONAL FFRENCH O'CARROLL AND PAUL FFRENCH O'CARROLL,

IN THEIR CAPACITIES AS EXECUTORS OF THE ESTATE OF RENEE FFRENCH O'CARROLL (DECEASED)

Defendants

JUDGMENT of Mr. Justice Oisín Quinn delivered on the 13 February 2025

I.          INTRODUCTION

1.         These proceedings concern a dispute about the proper construction of a rent review clause in a 99 year lease.  The lease was entered into on 19 April 1995 (the "Lease") between the late Renée ffrench-O'Carroll (the "Deceased"), as landlord and one of her sons, Arthur ffrench-O'Carroll, as tenant (the "Original Tenant").  The demised premises is a two storey mews at 5A and 5B Pembroke Lane, (the "Property") located at the rear of 55 Fitzwilliam Square, where the Deceased lived, until she died on 28 December 2015, aged 92.

2.         The defendants in these proceedings are brothers of the Original Tenant and are sued in their capacities as executors of the Deceased's estate.  The plaintiff is a receiver who was appointed on 1 April 2016 over the interest of the Original Tenant in relation to, inter alia, the Lease.  Accordingly, in relation to the Lease, the defendants stand in the shoes of the landlord and the plaintiff stands in the shoes of the tenant.

3.         On 9 March 2020, the first named defendant called on the receiver, pursuant to the terms of the Lease, to agree a revised increased rent in relation to the Property.  Agreement could not be reached and the matter was referred to an independent valuer who made determinations for increased rents in relation to the amount of the rent for the five year periods from 1 July 2013 and 1 July 2018.  These determinations are dated 15 January 2021 but were released to the parties on 22 April 2021.

4.         Both sides accepted those valuations. However the plaintiff (qua tenant) contends that the reviewed rent is only due, pursuant to the terms of the Lease, from the date of release of the determinations, namely 22 April 2021.  The defendants on the other hand, as landlord, contend that the proper construction of the Lease requires the tenant, in these circumstances, to pay the accrued arrears of rent.

II.        BACKGROUND

(i)         Procedural history

5.         These proceedings were commenced by Special Summons issued on 13 December 2023.  Pursuant to Order 3, rule(7) and Order 83, rule (1) of the Rules of Superior Courts, the court can determine any question of construction of and give a declaration as to the rights of the parties to a deed such as the Lease in question herein.  The proceedings were grounded on an affidavit of the receiver which exhibited the Lease and other relevant documentation.  The first named defendant, who is a chartered surveyor, swore an affidavit on his own behalf and represented himself.  Both the receiver and the first named defendant filed helpful written submissions.  The case was heard over the course of a day on 30 January 2025.

(ii)        The judgment of Smyth J. of 30 June 2006

6.         During the hearing it emerged that there had been legal proceedings between the Deceased and her son, the Original Tenant concerning inter alia the Lease and that this led to a judgment of the high court of Mr. Justice T.C. Smyth of 30 June 2006, [2006] IEHC 220.  This judgment was provided to the court on 5 February 2025 and by agreement of the parties it was indicated that the description of the background facts therein relating to the Lease was relevant context to the consideration of the interpretation of the Lease by the court.

7.         A consideration of the judgment of Smyth J. indicates the family background and circumstances in which the Original Tenant came to rent the Property from the Deceased.  In summary, the Deceased owned the house at 55 Fitzwilliam Square, Dublin 2.  She had lived there since 1944, when the property was gifted to her by her parents on her marriage.  There is a mews at the back of the house with frontage onto a lane, this is the demised property called 5A and 5B Pembroke Lane.  In or about 1989 her youngest son, the Original Tenant, agreed with his mother that he would renovate the mews property and open a restaurant there.  Along with his wife, the Original Tenant committed to and did make a substantial investment to renovate the mews property to provide for a restaurant on the ground floor and apartments on the first floor.  He also agreed to provide considerable management assistance to his mother in respect of her property interests.  In return she agreed to grant him a long lease at a nominal rent.  In 1989 there was a formal 'Agreement For Lease' entered into.  Then, in 1990 a formal lease agreement was executed.  This 1990 lease was subsequently lost.  In any event, by all accounts, the restaurant was a success.  In 1995 however a licensing application was required and the lease had to be submitted as part of this application. At this point it was noticed that the formal 1990 lease could not be found.  The parties accordingly drew up and entered into the Lease the subject of these proceedings.

8.         The detailed terms of the Lease will be described more fully below.  In summary however, the Lease provided for a 99 year term backdated to 1 June 1989. It provided for a relatively nominal rent of IR£1,000 (one thousand pounds).  It also provided that in the event that the tenant ceased to manage the property affairs of the landlord then "with effect from the date of cessation of such services" a "full open market yearly rent" would be due for the first floor of the property (where the apartments were located).  As Smyth J. describes it on page 18 at para (e) of his judgment "[t]he rent in respect of the upstairs portion of the mews was to be open market rent (with provision for periodic rent reviews) in the event of [the Original Tenant] ceasing to manage the other properties of [his mother]."

9.         The Deceased had become a successful and commercially savvy property investor over time; see page 23 of the judgment.  Mr. Justice Smyth concluded that in granting the lease to her youngest son with the initial nominal rent, that this was intended to be in satisfaction of his one fifth share on inheritance in the totality of the value of her estate.  In addition, the factual background as found by Smyth J. (and accordingly, as agreed by the parties to these proceedings) was that while the Original Tenant had initiated the process leading to the drawing up of the 1995 lease, that the Deceased was very influential in terms of the preparation of the Lease; see para (i) and (j) on pages 19-20.  As Smyth J. states "a new lease was urgently required by [the Original Tenant], otherwise all other matters were the input of [the solicitor] solely on the instructions of [the Deceased]."

10.       By 1998 the Original Tenant's personal circumstances and commitments had changed and despite the fact that he had proved himself to be a successful restaurateur he decided that it would be better for him and his own family to sub-let the restaurant.  This triggered the dispute with his mother, the details of which are not relevant to these proceedings.  However, suffice to say that it is an agreed fact that the Original Tenant ceased providing his mother with the management "services" contemplated by the Lease as of 30 June 1998.  There were then legal proceedings between them in the Circuit Court and on appeal to the High Court culminating in the judgment of Smyth J. on 30 June 2006 which judgment had, in part, the effect of upholding the Lease.

(iii)       The events leading up to these proceedings

11.       The Deceased died on 28 December 2015.  The defendants herein (both sons of the Deceased) were appointed as executors of her estate on 22 October 2019.  Meanwhile, a receiver was appointed over certain assets of the Original Tenant on 1 April 2016.

12.       Despite the fact that the Original Tenant had ceased providing the management services to the Deceased on 30 June 1998 no "full open market yearly rent" had been paid in respect of the first floor of the Property.

13.       On 9 March 2020 the first defendant called on the receiver to agree to pay revised rents for the five year periods from 1 July 2013 and 1 July 2018 in respect of the first floor of the property.

14.       A revised rent could not be agreed and the independent valuation process provided for in the Lease was triggered.  On 30 July 2020 an independent chartered surveyor was appointed.  He took submissions from the parties and inspected the Property and made his determinations (the "Determinations") dated 15 January 2021.  On payment of his fees, the Determinations were released to the parties on 21 April 2021, being received the next day 22 April 2021.  In respect of the five year periods from 1 July 2013 and 1 July 2018 he assessed the full open market yearly rent for the first floor of the Property at €14,000 (fourteen thousand euro) per annum and €18,500 (eighteen thousand five hundred euro) per annum respectively.

15.       The first defendant says that the terms of the Lease require the receiver as tenant to pay the arrears due for a period of six years prior to the demand, in other words, the arrears due pursuant to the Determinations from 10 March 2014.

16.       The receiver says that the Lease when properly construed only obliges the tenant to commence paying the increased rent from the date of the next 'Gale Day' following release of the Determinations, which in this case is 1 July 2021.

17.       In addition to the foregoing it is necessary to determine what proportion of the initial £1,000 rent should be apportioned to the ground floor (in respect of which there is no rent increase).  In that regard, and this issue was not one of any substantial significance or dispute as between the parties, there was agreement during the hearing that the court could apportion two thirds of that initial rent to the ground floor.

18.       Accordingly, the issue as between the parties is whether the revised rents as set out in the Determinations in respect of the first floor of the Property are to be paid from 10 March 2014 or from 1 July 2021.  There is also a question as to what, if any interest, might also be payable by the receiver.

III.       RELEVANT LEGAL PRINCIPLES

19.       There was no significant disagreement as the relevant legal principles to be applied in the context of the question of construction raised by this dispute.

20.       The case law (see Analog Devices B.V. v Zurich Insurance Company [2005] 1 IR 274; I.C.S. v West Bromwich B.S. [1998] 1 All ER 98 at pages 114-115;  Law Society v MIBI [2017] IESC 31 see para.s 7-15 of O'Donnell J.; and Premier Dale Limited v Arachas Corporate Brokers Limited [2022] IEHC 178 and para.s 84 et seq.) identifies a number of important principles, the most relevant of which are as follows:-

(i)         the overarching principle to be applied in interpretating a clause in a legal contract such as a lease is to seek to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation they were in at the time of the contract;

(ii)        the court will look at the words in the contract and also the 'background knowledge' or as it is sometimes referred to, the 'matrix of fact', which includes anything which would have affected the way in which the language would have been understood by a reasonable person;

(iii)       evidence of previous negotiations and declarations of subjective intent are not admissible;

(iv)       the meaning of words in the document is what the parties using the words against the relevant background would reasonably have understood those words to mean;

(v)        the words should be given a single meaning which is the meaning both parties are taken to have agreed upon and that meaning is to be determined from a consideration of the agreement as a whole;

(vi)       semantic and syntactical analysis of words should yield to common sense meanings if there is a conflict between the two.

21.       In the context of a lease containing a rent review clause it is important to keep in my mind the type of contract involved.  This was a 99 year lease. As Lord Hoffman states in I.C.S. the law does not require the courts to "attribute to the parties an intention which they plainly could not have had".

22.       The court was helpfully referred to the House of Lords decision in United Scientific Holdings Ltd. v Burnley Borough Council [1978] AC 904 which in turn was approved of by the Supreme Court in Hynes Limited v Independent Newspapers Limited [1980] IR 204.  These cases vividly describe the commercial significance of rent review clauses in long leases.  While they both focus on the question as to whether or not time periods set out in rent review clauses should be treated as being "of the essence" they contain some relevant statements of principle concerning the legal and commercial context of a rent review clause in a long lease.

23.       The commercial and legal background is discussed by O'Higgins CJ in Hynes at page 211 of the report in the following terms:-

"Over the past two decades, in both the United Kingdom and Ireland, the prevalence of inflation in the property market has led to the introduction of some provision for rent review if the term being negotiated is for any significant number of years. Lessors, faced with constantly changing money and property values, have not been prepared to lease their property for a long period without providing for a periodic revision or adjustment of rent. Such rent review clauses vary in form and content. In some cases the rent review may be initiated only by the lessor, in others it may be initiated by either the lessor or the lessee. In some cases a rent review clause may be associated with a "break clause" which entitles a lessee to surrender the demised premises if he is unwilling or unable to pay the increased rent. In other cases the lease clearly contemplates periodic revisions of the rent and the lessee undertakes to pay the original rent and also any revised rent coming into operation during the term. Whatever form such clauses take, in general they specify a procedure for the determination of the revised rent and a time-table for the taking of the necessary steps in that procedure which, when followed, leads to the declaration of the new rent not later than the review date."

24.       From the foregoing, it can be gleaned that, in general at least, the primary arrangement as between the parties to a long lease will usually involve an express agreement to potentially the payment of a revised rent according to market conditions for a specific period, often five years.  Thereafter, the lease may well set out 'machinery' whereby that revised rent is to be calculated in the event that agreement cannot be reached.  In Hynes O'Higgins CJ states as follows at p215:-

"It is not necessary to examine in any detail the careful, long and detailed speeches of the Law Lords who participated in the Burnley Case.¹ [1978] A.C. 904. It is sufficient to say that, with one reservation, they were prepared to regard the inclusion in a lease of a rent review clause as an acceptance by the tenant of an obligation to pay to the landlord a rent so determined and, further, that this acceptance was an inseverable part of the whole consideration for the landlord's grant of the terms of years for the length agreed. The majority view was to this effect even when the right to initiate or to "trigger" the rent review was exclusively that of the landlord. It was recognised that there could be exceptions as where a break-clause was included in the lease entitling the tenant to surrender if the rent were increased.

Viewed in this light, the time-table for the review or determination of the new rent was regarded by the court as subsidiary to an obligation already accepted by the tenant and as mere machinery for carrying into effect the real intention of the parties that periodic increases of rent should take place." (underlined for emphasis).

25.       In Hynes O'Higgins CJ engages in a careful analysis of the House of Lords decision in the Burnley case and ultimately indicates approval of it.  At page 216-217 O'Higgins CJ concludes:-

"In Ireland the fusion of common-law and equitable rules was initiated by the Supreme Court of Judicature Act (Ireland), 1877, which contains similar provisions in s. 28(7) to those already noted in the English Acts, and was completed by the Courts of Justice Act, 1924, and the Courts (Establishment and Constitution) Act, 1961.

In the circumstances existing in this appeal, it seems to me that the reasoning in the Burnley Case [1978] A.C. 904. applies. The wording of the reddendum indicates that the plaintiffs accepted an obligation to pay not only the initial rent but also "such increased rent as may from time to time be payable hereunder." The lease contains no break clause or anything which would distinguish it from a lease under which the lessee accepts the normal obligation of periodic reviews of rent. It appears to me that the rent review clause amounts to machinery for the implementation of what was accepted from the commencement of the lease, that is to say, a review of the rent at the stipulated periods." (underlined for emphasis).

IV.       RELEVANT PROVISIONS OF THE LEASE

26.       The most relevant clauses contained in the Lease are as follows:-

"1.4     "Rent" means the Rent from time to time payable hereunder whether the same shall be in the amount hereby initially reserved or as increased pursuant to the provisions in that behalf hereinafter or in any Schedule hereto contained.

...

HABENDUM

TO HOLD the demised premises unto the Tenant for the term of 99 years from 1^st day of July 1989 subject as hereinafter provided.

REDENDUM

YIELDING AND PAYING therefor during each year the said term the yearly rent of IR£1,000 (one thousand pounds) payable quarterly in advance ... PROVIDED HOWEVER AND IT IS HEREBY AGREED that if the Tenant shall, prior to the death of the Landlord or the sale of her other properties, cease to undertake the management of such other properties on her behalf then with effect from the date of cessation of such services the proportion of rent attributable to that part of the Demised Premises comprising the first floor thereof shall be increased with effect from that date and in every succeeding fifth year thereafter to such sum as shall be equivalent to the full open market yearly rent for such portion of the demised premises ... and in default of agreement on the rent attributable to the first floor of the demised premises the same shall be determined in accordance with provisions in that behalf contained in the Schedule hereto ...

THIRD SCHEDULE

(PROVISIONS AS TO RENT REVISIONS)

1.         The revised rent referred to in the Redendum to the within Lease in respect of any of the periods therein mentioned may be agreed at any time between the Landlord and the Tenant or (in the absence of agreement) be determined not earlier than the date of commencement of such period ("the Review Date") by an Independent Valuer such Independent Valuer to be nominated (in the absence of agreement between the parties) upon the application (made at any time after the Review Date) of either the Landlord or the Tenant by the Chairman [of the Society of Chartered Surveyors] ...

AND the revised rent to be determined by the Independent Valuer shall  be such as in his opinion represents at the Review Date the full open market yearly rent for the first floor of the demised premises let as a whole ...

            ...

            5.         If the revised rent in respect of the period shall not have been ascertained on or before the Review Date referable thereto rent shall contain to be payable up to the Gale Day next succeeding the ascertainment of the revised rent at the rate payable during the preceding period AND on such Gale Day the Tenant shall pay to the Landlord the appropriate instalment of the revised rent.  For the purpose of this paragraph the revised rent shall be deemed to have been ascertained on the date when the same shall have been agreed between the parties or as the case may be on the date of the notification to the Tenant of the determination of the Independent Valuer.

            ...

            8.         If the Independent Valuer comes to the conclusion that the current market rent of the first floor of the demised premises at the commencement of such Review Date is less than the rent (hereinafter called "the Current Rent") operative for the period immediately preceding the same the new rent shall nevertheless be the same as the Current Rent and the determination of the Independent Valuer shall so state."

V.         SUBMISSIONS

27.       On behalf of the plaintiff it was submitted that the court should look simply at the terms of clause 5 of the third schedule of the Lease.  This means, it was submitted, that irrespective of whether there were any delays in either agreeing a revised rent, or nominating an independent valuer, or irrespective of how long that process takes, the new revised rent is only due from the next Gale Day after the revised rent is either agreed or a determination of the independent valuer is released to the parties.

28.       The first named defendant urged the court to look at clause 5 of the third schedule in the context of the lease as a whole and, in addition, by taking account of the nature of the agreement itself and the importance of rent review clauses (as discussed in Burnley and Hynes). He indicated that the context was an agreement between his mother and his brother whereby for a relatively nominal rent in respect of the first floor of the Property, his brother would manage the other properties owned by his mother.  If or when that ceased, as it did, on 30 June 1998 thereafter "with effect from that date" then "full open market yearly rent" was due.  The logic of the position was that if there was any delay to working out that 'market rent' that this did not mean the tenant did not ultimately owe it.  The rent review clauses contained in the third schedule to the Lease were properly viewed as "machinery" (as described in Hynes) and were therefore secondary to the primary obligations contained in the Redendum clause of the Lease.

VI.       DECISION

29.       The court was greatly assisted by the helpful and indeed collaborative manner in which this dispute was presented.  While the plaintiff's interpretation is somewhat understandable if one is to focus solely on the words of clause 5 of the Third Schedule it is not, in my view, ultimately the correct interpretation.

30.       The primary obligation to pay the revised rent is contained in the Redendum.  It is provided for in a context whereby the landlord's son would cease to assist her in managing her other properties.  The Redendum clause makes clear, in at least two parts, that the open market rent for the upstairs falls due at that point; see the words "... then with effect from that date..." and "... shall be increased with effect from that date...".  The "date" in question is the date that the tenant ceases providing the services.  The Redendum clause then provides that this date will form the starting date for five year periods when an "open market rent" will be due for the first floor.  The date when the services ceased is agreed between the parties as 30 June 1998.

31.       The provisions contained in the Third Schedule are more correctly viewed, in context and as a starting point, as the "machinery" whereby the new market rent can be agreed or determined in default of agreement by means of a procedure involving an independent valuer process (who can receive submissions and inspect the property etc).

32.       This approach and structure is what makes sense legally and commercially, as described by the House of Lords in the Burnley case and by the Supreme Court in Hynes.

33.       The procedure set out in the Third Schedule necessarily involves, if an independent valuer is involved, a delay beyond the commencement of each five year period, which is called the "Review Date".  By virtue of clause 1 of the Third Schedule an application to the Chairman of the Society of Chartered Surveyors for the nomination of an independent valuer can only be made "after the Review Date"; per clause 1 of the Third Schedule.

34.       It seems inherently implausible that a landlord (who, after all, according to the factual matrix as set out in the judgment of Smyth J., had sole input as to the terms of the drafting of the Lease) would arrange by design that a term of the machinery for setting a revised market rent would inevitably lead to the usurpation of the primary obligation in the Redendum of the Lease which provides in two places for the revised rent to take "effect" from the date of the cessation of the services in question.

35.       Turning then to the words in clause 5 of the Third Schedule.  The question arises as to the meaning, in the foregoing context, of the obligation to pay, on the next Gale Day after the revised rent has been ascertained, the "appropriate instalment of the revised rent".  Without reference to the wider context, it can be seen that a case can be made for a meaning that confines these words to a quarterly payment of the new annual market rent.  However, when read in the manner required by the principles set out above, I am satisfied that the clause means in this Lease that the payment that is "appropriate" is a payment that includes any necessary arrears.

36.       The clauses of the Third Schedule are properly viewed as the "machinery" for the calculation of a revised "market rent".  They do not alter or take precedence over the clear intent and agreement as set down in the Redendum clause that if the tenant ceased providing the property management services to his mother, then the rent for the first floor "shall be equivalent" to open market rent "with effect from the date" of the cessation of those services.

37.       The structure envisaged on this interpretation is not without some benefits to the tenant. He would have the benefit of the money (the portion of the increased rent) for any period of delay occasioned by the machinery.  As Kenny J. notes in Hynes at page 220 speaking about the tenant in such a scenario, "they have the use of the money ... until the [new] rent is determined".

38.       However, the interpretation urged by the plaintiff would lead to the inevitable undermining of the agreement as set out in the Redendum clause and would provide the tenant with a windfall benefit without a purpose and of a somewhat arbitrary nature as it would in turn be a benefit that would be measured in value by how long the independent valuation process took.  In addition, it amounts to a legal architecture that would give an obvious incentive to a tenant to avoid agreeing a new revised rent and to trigger, and potentially delay, the independent valuation machinery.

39.       Accordingly, I am satisfied that the correct interpretation of clause 5 in the Third Schedule requires that the tenant pay any arrears of rent due on the next Gale Day after the revised rents gave been ascertained.

 

VII.     CONCLUSION

40.       I am satisfied that the interpretation of the Lease urged by the defendant is the correct one.

41.       Accordingly, the plaintiff should make a payment that includes the arrears due from 10 March 2014 based on the first determination and then from the 1 July 2018 based on the second determination.

42.       By agreement of the parties indicated during the hearing of these proceedings, the correct apportionment is to measure the rent for the ground floor at the euro equivalent of two thirds of the original rent of IR£1,000 (one thousand pounds).

43.       I will hear from the parties as to the precise amounts due and as to the question of interest and costs.