Stapleyside v Carraig Donn: text of property agreement must be interpreted in context

Context-Button-300x300The text of property documents, like that of commercial documents, must be interpreted within the context of the agreement. Here, a term that Stapleyside “have an option to take surrender of the Unit 25X lease subject to 90 days notice” could only be interpreted as meaning it could demand surrender of the property from Carraig Donn on 90 days notice. However, it could not be interpreted as meaning that Stapleyside could terminate the lease on 90 days notice.

Background

In 2002, Carraig Donn entered into a 25 year lease with Stapleyside for a shop unit. The initial rent was €120,000, to be reviewed every five years. In 2007 the rent was reviewed up to €309,500. Due to financial difficulties, in 2009 Carraig Donn sought a rent reduction. Stapleyside offered a reduction to 67% for 2009, subject to a term that it would “have an option to take surrender of the Unit 25X lease subject to 90 days notice”. Carraig Donn accepted. In November 2009, Stapleyside issued notice to Carraig Donn that:

We, STAPLEYSIDE COMPANY, HEREBY GIVE NOTICE that it is our intention to terminate on the 16th day of February 2010 the term granted by the Lease referred to in the Schedule hereunder in respect of the premises located within the Crescent Shopping Centre, Dooradoyle, County Limerick.

High Court

Before the High Court case came to hearing, Stapleyside amended its claim from seeking an order for specific performance to arguing that the notice to terminate had no effect and the original lease remained in effect. Carraig Donn argued that the effect of the notice was that the lease was terminated by Stapleyside and it was entitled to apply to the Circuit Court under the Landlord and Tenant (Amendment) Act 1980 for the grant of a new lease.

McGovern J (here) held that there was ambiguity in term of the 2009 agreement and, applying the contra proferentem rule, it could not be interpreted as providing Stapleyside with power to terminate the agreement under conditions where Carraig Donn could not rely on its statutory right to a new lease under the 1980 Act. He held that the effect of the 2009 notice was that Stapleyside served a Notice of Termination, Carraig Donn accepted, and Carraig Donn could then make an application to the Circuit Court for a new lease under the provisions of the 1980 Act. This, he said, “seems fair and reasonable to both parties, having regard to current economic conditions and rental values” [27]. Stapleyside appealed that decision to the Supreme Court. Without prejudice to that appeal, the Circuit Court fixed the terms of a new lease at an annual rent of €230,000.

Supreme Court

Allowing Statleyside’s appeal (here), Clarke J held that the text of the 2009 agreement must be interpreted within the context it was agreed [6.3]. But for better or worse, he said, the parties used the word surrender. Therefore, the proper construction of the 2009 agreement was that it entitled Statleyside to serve notice to surrender which would require Carraig Donn to surrender the lease on expiry of 90 days [6.5]. As Statleyside did not serve notice to surrender, and as Carraig Donn did not surrender the lease, the question for the Court was whether Statleyside could terminate the lease outside the terms of the 2009 agreement. He held that, under the terms of the lease, Statleyside had no right to terminate by a simple service of notice [6.7]. Therefore the original lease remained in place, the Circuit Court application was not valid, and the rent remained at €309,500 as fixed on the last review.

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