When a lease is renewed, the process must be in conformity with the conditions agreed and the intention of the lessee to exercise the right of renewal must be indicated clearly and unequivocally. Although one would assume that this is a relatively simply process, the case ofVan Leeuwen v Super Shine Products Ltd (HC, 27/01/2011) suggests otherwise. In that case, the plaintiff, who was the sublessor, claimed for breach of the obligation to pay rent from the first and second defendants (the sublessee and guarantor respectively) and held that the first defendant had renewed the lease. The first defendant had ceased paying rent and vacated the premises at the end of the original lease and, in defence, stated that it had not exercised their right of renewal.
The primary question before the Court (the secondary being the liability of the second defendant) was simple, did the first defendant exercise their right of renewal of the lease? A number of e-mail exchanges and voice messages, together with the contractual context of the situation, were examined to answer this question. The first voice message of the first defendant stated that while they would like to renew the lease, a meeting would need to be arranged to discuss “aspects” of the lease before they would “sign up” for another term. However a day later, a second message was left with the plaintiff confirming their intention to renew the lease and wanting to arrange a meeting to discuss the future. Following these two voice messages came an e-mail that read, “I left a message on your answer machine confirming our intention to renew the lease. We would like to make a time to meet with you and discuss our plans for the future.” In response to the plaintiff’s claim, the defendant insisted that this could not be read as a notice to renew as it must be read in context with voice messages which implied that it was conditional upon other “aspects”. The Court did not consider that his argument was credible and held that the e-mail in question gave a clear and unequivocal intention to exercise the right of renewal. The Court also observed that the period in which the defendant could exercise its right had formally expired and the granted extended period was drawing to an end. This observation confirmed to the Court that this was not an occasion for expression in unclear terms but rather a time to confirm their intention to continue the lease. Further, the Court examined the subsequent behaviour of the parties, including negotiations over rent, as consistent with this finding, and it was really a dispute over increased rent that lay at the heart of the issue.
The case confirms the need of clear and unequivocal communication in business transactions and that it may be very costly to change one’s mind after intention has been communicated.