The tenant argued that a term should be implied into the leases whereby the proportion of rent paid in advance of the break date that related to the period after the break date should be refunded and, at first instance, Mr Justice Morgan agreed with the tenant. However, on appeal, the Court of Appeal held that it was not necessary to imply the term into the leases to make them work commercially. It would have been obvious to the parties, when they negotiated the leases, that there was a possibility that the rent would have to be paid in full in respect of the last quarter day before the break date. The parties could have addressed this, but they did not.
The terms “instalments” and “proportionally for any part of a year” could not be used to justify the implied term where, as in this case, there were other break conditions to be complied with and the tenant could not be certain, when paying the final quarter’s rent before the break date, that the break would take effect on the break date. However, although she declined to decide the issue, Lady Justice Arden did indicate that, had all the conditions to the break been fulfilled prior to the due date for payment of the final quarter’s rent, then on the wording of the lease it might have been open to the tenant to have paid an apportioned rent just up to the break date, as it would have been certain that the break would be effective.
On the tenant’s appeal to the Supreme Court, Lord Neuberger, giving the lead and unanimous judgment, agreed with the Court of Appeal and dismissed the appeal. He confirmed that rent payable in advance is not apportioned unless the lease provides so expressly and that it was not “necessary” to imply a term for repayment to make the leases work. He also agreed with Lady Justice Arden’s view that had the tenant paid the break premium prior to the final rent payment date, so that it was certain that the lease would end on the break date, then the December quarter’s rent could have been apportioned.