[1977] 2 All ER 62
Lord Diplock: "My Lords, if by 'rules of equity' is meant that body of substantive and adjectival law that, prior to 1875, was administered by the Court of Chancery but not by courts of common law, to speak of the rules of equity as being part of the law of England in 1977 is about as meaningful as to speak similarly of the statutes of Uses or of Quia Emptores. Historically all three have in their time played an important part in the development of the corpus juris into what it is today; but to perpetuate a dichotomy between rules of equity and rules of common law which it was a major purpose of the Supreme Court of Judicature Act 1873 to do away with, is, in my view, conducive to erroneous conclusions as to the ways in which the law of England has developed in the last 100 years.
Your Lordships have been referred to the vivid phrase traceable to the first edition of Ashburner's Principles of Equitya where, in speaking in 1902 of the effect of the Judicature Act, he says 'the two streams of jurisdiction [sc law and equity], though they run in the same channel, run side by side and do not mingle their waters.' My Lords, by 1977 this metaphor has in my view become both mischievous and deceptive. The innate conservatism of English lawyers may have made them slow to recognise that by the Judicature Act 1873 the two systems of substantive and adjectival law formerly administered by courts of law and courts of chancery (as well as those administered by courts of admiralty, probate and matrimonial causes), were fused. As at the confluence of the Rhone and Soane, it may be possible for a short distance to discern the source from which each part of the combined stream came, but there comes a point at which this ceases to be possible. If Professor Ashburner's fluvial metaphor is to be retained at all, the waters of the confluent streams of law and equity have surely mingled now."
Supreme Court of Judicature Act 1873 s 25(7): "Stipulations in contracts, as to time or otherwise, which would not before the passing of this Act have been deemed to be or to have become of the essence of such contracts in a Court of Equity, shall receive in all Courts the same construction and effect as they would have heretofore received in equity."
s 25(11): "Generally in all matters not herein-before particularly mentioned, in which there is any conflict or variance between the Rules of Equity and the Rules of the Common Law with reference to the same matter, the Rules of Equity shall prevail."
Lord Diplock: "With the effect that courts of law gave to those stipulations as to time that they did not regard as being of the essence of the contract, courts of equity before 1873 had no occasion to interfere by way of equitable relief. Such stipulations were unaffected by s 25 of the Judicature Act 1873. Nor did the coming into force of that Act bring to a sudden halt the whole process of development of the substantive law of England that had been so notable an achievement of the preceding decades. Yet that is what it would have done as respects the law of contract if thereafter whenever the effect of a contractual stipulation as to time or otherwise was in question it were necessary to enquire whether or not a court of equity would have granted relief against its treatment as a 'condition precedent' in a court of law before 1875."
"In 1925, s 25(7) of the Judicature Act 1873 was replaced by s 41 of the Law of Property Act 1925. The wording differs slightly:
'Stipulations in a contract, as to time or otherwise, which according to rules of equity are not deemed to be or to have become of the essence of the contract, are also construed and have effect at law in accordance with the same rules.'
The Law of Property Act 1925 was a consolidation Act. It restates the law as it had been declared in 1873 but substitutes a reference to 'rules of equity' for the reference to a court of equity which had been abolished as a separate court more than 50 years before. I have already commented on the danger of treating the use of this expression today as anything more than an indication of the source to which a current rule of the substantial or adjectival law of England can be traced. The change in wording in the substituted section does not in my view make any difference to its substance. It makes it clear that there should continue to be, as there had been since 1875, only one set of rules for judges to apply in determining whether a particular stipulation as to time or otherwise was of the essence of a contract. It places no ban on further development of the rules by judicial decision."
"Contemporaneously with this development of the rules of equity by the Court of Chancery, the courts of common law were in process of developing for themselves a not dissimilar rule in relation to stipulations as to time in other contracts, but were reaching their solution by a different route. They did so by a growing recognition of exceptions to the rule which had been fostered in the early part of the 18th century by the necessity for the plaintiff under the then current rules of pleading to aver performance or willingness or ability to perform all stipulations on his part in the precise words in which they were expressed in the contract. This rule treated all promises by each party to a contract as 'conditions precedent' to all promises of the other: with the result that any departure from the promised manner of performance, however slight that departure might have been, discharged the other party from the obligation to continue to perform any of his own promises. The history of the development by common law courts of exceptions to this rule is traced in the judgments of the Court of Appeal in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd from its origin in Boone v Eyre in 1779 to the judgment of Bramwell B in Jackson v Union Marine Insurance Co Ltd ((1874) LR 10 CP 125 at 147, [1874–80] All ER Rep 317 at 324) on the eve of the coming into force of the Judicature Act 1873."
"It was this concentration of initiative and benefit in the landlord that led the Court of Appeal in the second appeal to regard the rent review clause as conferring on the landlord a unilateral right to bring into existence a new contractual relationship between the parties. This it regarded as sufficiently analogous to an option, to make time of the essence of the occurrence of each one of the events in the timetable laid down in a review clause for the determination of the new rent. For my part, I consider the analogy to be misleading. The determination of the new rent under the procedure stipulated in the rent review clause neither brings into existence a fresh contract between the landlord and the tenant nor does it put an end to one that had existed previously. It is an event on the occurrence of which the tenant has in his existing contract already accepted an obligation to pay to the landlord the rent so determined for the period to which the rent review relates. The tenant's acceptance of that obligation was an inseverable part of the whole consideration of the landlord's grant of a term of years of the length agreed. Without it, in a period during which inflation was anticipated, the landlord would either have been unwilling to grant a lease for a longer period than up to the first review date or would have demanded a higher rent to be paid throughout the term than that payable before the first review date. By the time of each review of rent the tenant will have already received a substantial part of the whole benefit which it was intended that he could obtain in return for his acceptance of the obligation to pay the higher rent for the succeeding period.
My Lords, I see no relevant difference between the obligation undertaken by a tenant under a rent review clause in a lease and any other obligation in a synallagmatic contract that is expressed to arise on the occurrence of a described event, where a postponement of that event beyond the time stipulated in the contract is not so prolonged as to deprive the obligor of substantially the whole benefit that it was intended he should obtain by accepting the obligation.
So on the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contra-indications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances, the presumption is that the timetable specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date is not of the essence of the contract. I turn then to the rent review clauses in the instant appeals."
See also the speech of LORD SIMON OF GLAISDALE.
