Amberley (UK) Limited (Amberley) managed a care home, and West Sussex County Council (WSCC) paid rent to Amberley for some of the residents of the care home. The contract between Amberley and the residents of the care home allowed Amberley to review rents as costs increased. The exact wording was, “the level of fees is subject to review as costs increase”. As Amberley increased rents under the provision of that clause of the contract, WSCC refused to pay, arguing that the rents had been increased too much. Amberley argued that it had the right to increase rents unilaterally under the contract.
The High Court ruled against Amberley. The Court of Appeal (CA) has now dismissed Amberley’s appeal. The CA considered whether the parties intended to grant Amberley such a unilateral right, and noted that unilateral variation clauses are enforceable, even if they are detrimental to the other party. However, those clauses had to be clearly drafted in order to be enforceable. In this particular clause, the CA took a narrow interpretation as the wording was not clear enough for what Amberley had wanted. The CA ruled that Amberley only had the right to ‘review’ the rents as costs increased and not impose a unilateral increase. The contract gave no indication of what such a review would involve, who would perform it, how often or on what basis. The CA thought the contract meant that Amberley would conduct the review but if it wanted to increase rents following the review, it needed to get a resident’s approval before doing so.
This is an important case for businesses to be aware of. If a unilateral clause is intended, then the clause should state this specifically. Otherwise, there is a risk the courts will give the clause a narrow interpretation and rule that it is not unilateral.