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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 192
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A172/05
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OPINION OF LORD GLENNIE
in the cause
ABACUS ESTATES
LIMITED
Pursuers;
against
BELL STREET ESTATES
LIMITED AND
CLINTON
CARDS (ESSEX) LIMITED
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: McColl; HBJ Gateley Wareing
First Defender: Hawkes; Biggart Baillie
Third Party: Campbell; Archibald Campbell & Harley
15 December
2006
Introduction
[1] The
pursuers claim to be vest in the landlord's interest in a lease between the
Prudential Assurance Company Limited and Benefit Footware Limited dated
16 September and 17 October
1963. The lease was of the
ground floor and basement of a building at 18 High
Street, Paisley, and rights
in the common parts including the foundations, walls and roof, close and common
stair, drains, water, gas and soil pipes, electric mains and cables and so
on. The defenders are vest in the
tenant's interest in the lease. There
is, in turn, a sub-lease of the property dated 31 January and 22 March 1991 between Footwear
Property Limited and Clinton Cards Limited.
The third party are vest in the sub-tenant's interest in that
sub-lease. For convenience I shall, in
some places, refer to the leases as the "Head Lease" and the "Sub-Lease" and to
the parties as "landlord", "tenant" and "sub-tenant".
[2] The
action concerns works to be carried out to the property in terms of a Schedule
of Dilapidations prepared on behalf of the pursuers by their surveyors in about
March 2004. The Schedule is in twelve
sections. The first five sections
identify work required to be done to the common parts of the building. The remaining sections concern works required
to be carried out to the ground floor and basement. The pursuers contend that the defenders are
bound to carry out all the works in the Schedule. The defenders accept that they are obliged to
carry out the work identified in respect of the ground floor and basement but
deny that they have to carry out that identified in respect of the common
parts. They say that their obligation in
respect of the work to the common parts is simply to reimburse the pursuers for
such work as they, the pursuers, were required by law to carry out. The defenders seek to pass down to the third
party the liability alleged against them by the pursuers. The third party, in turn, adopts substantially
the same position against the defenders as the defenders adopted against the
pursuers.
[3] The
matter came before me on the Procedure Roll. I heard argument on the pursuers' general plea
to the relevancy of the defenders' averments and on the defenders' plea to the
relevancy on the third party's averment.
A certain amount of agreement was reached during the course of the
discussion and, in the end, the issues narrowed down to questions of
construction of the relevant clauses of the Head Lease and the Sub-Lease.
[4] In
the course of argument, I was reminded, under reference to Project Fishing International v CEPO
Limited 2002 S.C.534, a case in which the Inner House sought to apply the
observations of Lord Hoffmann in ICS
Limited v West Bromwich Building
Society [1988] 1 W.L.R.896, 913, that in a commercial document the Court
should attempt to give the document a construction which reasonable men, versed
in the type of business with which the document deals and being aware of the
background relevant to the transaction, would have given it. I intend to follow that approach in dealing
with the documents put before me.
[5] It
is necessary to consider the two documents separately. Accordingly, I begin by considering the terms
of the Head Lease.
The
Head Lease
[6] The
relevant repairing clauses in the Head Lease are those contained at
Clause THIRD, sub-clauses (iv) and (v).
Clause THIRD sets out a number of obligations on the tenants. The relevant sub-clauses provide as
follows:
"(iv) From time
to time and at all times during the currency of this Lease to repair, clean and
keep in good and substantial repair and condition the subjects let and all
additions thereto including pavement lights (if any) and all landlord's
fixtures and fittings.
(v) At all times
during the currency of this Lease to bear and pay all costs and expenses
payable by either the landlord or the tenant in respect of the subjects let for
making, repairing, maintaining, rebuilding and cleaning all passages, roads,
footpaths, pavements, sewers, drains, pipes, watercourses, mutual walls,
gables, roofs, foundations, fences, railings or other similar subjects which
may form part of or be used in conjunction with the subjects let either alone
or in common with other subjects and to free and relieve the Lessors of all
such costs and expenses; to free and
relieve the Lessors of any obligation to keep the subjects let wind and water
tight or to execute any other repairs or replacements, the Lessees being bound
to execute all repairs, replacements and redecorations which shall become
necessary during the currency of this Lease and to carry out, perform and
observe at all times all obligations, burdens, conditions, stipulations and
others imposed on the owner or occupier of the subjects let whether by the
title deeds thereof, by common law, by statute or otherwise".
[7] Mr
MacColl, for the pursuers, argued that sub-clause (iv) was plain and very wide
in its ambit. It obliged the tenant to
repair, clean and keep in good and substantial repair and condition "the
subjects let". That expression included
the ground floor and basement on the common parts. The obligation was unqualified. The fact that sub-clause (v) imposed an
obligation on the tenant to bear and pay all costs and expenses payable by the landlord
for making, repairing, maintaining, rebuilding and cleaning various parts of
the subjects, including the common parts of the building, did not detract from
the broad terms of sub-clause (iv). It
simply covered the case where the landlord may have had to incur expenditure
and therefore had a right of recoupment.
For the tenant, Mr Hawkes put forward a different
construction. He pointed out that
sub-clause (v) was concerned with the common parts of the building. It provided a different regime in respect of
the upkeep of these common parts, in that it required the tenant to reimburse
the landlord in respect of the costs and expenses which the landlord was
required to pay. This contrasted the
position with sub-clause (iv), under which the tenant had the primary
obligation of maintenance and repair.
Reading the two sub-clauses together, it was plain that, despite its
apparently wide wording, the ambit of sub-clause (iv) was properly to be
understood as being the ground floor and basement part of the building and not
the common parts. As regards the common
parts, the only obligation was to reimburse the landlord, and that only when
the landlord was required by law to make the payments. This latter proposition was derived, so Mr
Hawkes argued, from the use of the word "payable" in the early part of
sub-clause (v). This imported, as a pre‑condition
of the tenants' liability to reimburse the landlord, the existence of an
obligation on the landlord to carry out the works.
[8] When
the discussion opened, it appeared to be common ground between Mr MacColl
and Mr Hawkes that the expression "the subjects let" meant not only the
ground floor and basement part of the building, but also the common parts. On this basis, there was clearly some force
in Mr MacColl's argument that sub-clause (iv) was unqualified in respect of the
parts of the building to which the repair and maintenance obligation
applied. It applied to the whole of "the
subjects let". It is, however, in my
opinion, necessary to look somewhat more critically at that. The expression "the subjects let" appears in
Clause FIRST of the Head Lease. In
terms of the Head Lease, the landlord lets to the tenant:-
"ALL and WHOLE
the subjects forming the ground floor and basement premises at Eighteen HIGH
STREET, in the BURGH of PAISLEY and COUNTY of RENFREW described in Disposition
by A.L. Scott & Son Limited in favour of The Prudential Assurance Company
Limited dated the Nineteenth day of September and recorded in the Division of
the General Register of Sasines for the County of Renfrew on the Fifth day of
October, both in the year Nineteen hundred and sixty three: together with the whole rights, common,
mutual and others described in the said Disposition, the whole pertinents
thereof and the fixtures and fittings therein so far as belonging to the
Lessors (which subjects are hereinafter referred to as 'the subjects let')
.....".
The Disposition referred to in that
passage identifies the property which is the subject thereof as being, in the
first place:
"The subjects
forming Eighteen .... High Street in the Burgh of Paisley and County
of Renfrew comprising a ground
floor shop and basement ....".
and goes on after identifying
certain other matters to add this:
"together with
(First) a right of common property jointly with the proprietors of the
remainder of the said tenement in the solum .... (Second) a right of common
property jointly with the said proprietors of the remainder of the said
tenement in the foundations, walls and roof of the said tenement, the chimney
stalks thereof, the close and common stair (but excluding the water closets and
lavatories entering from the said common stair) and the common drains, soil,
rain, water, gas and other pipes, electric mains, cables, wires and pipes
therefor so far as used in common for the shops, offices and dwellinghouses in
the said tenement ...."
Taking the terms of the Disposition
as incorporated into Clause FIRST of the Head Lease, it is, of course, plain
that "the subjects let" include not only the ground floor shop and basement of
the building but also the rights of common property in the solum, the
foundations, walls and roof and other parts of the tenement. These latter rights are held jointly with the
proprietors of the other parts of the building.
[9] As
between the pursuer and the other proprietor or proprietors of the remainder of
the tenement, any repairs to the common parts will be likely to require
discussion and agreement between them.
In terms of that agreement it is likely that each will bear a proportion
of the costs of the work. Whilst, therefore,
in terms of the Head Lease, it is readily understandable that the landlord
should wish to transfer to the tenant a maintenance and repairing obligation in
respect of the ground floor shop and basement of the building, it is less easy to
see how this works in terms of the common parts. The pursuer cannot divest himself, vis-เ-vis
the other proprietor(s) of the tenement, of the responsibility for negotiating
and carrying out all or part of the work simply by virtue of having entered
into a lease with a tenant. Nor can the tenant
insist on interposing himself into that relationship. One might therefore expect that the repair
and maintenance obligations imposed on a tenant in terms of a lease of the
ground floor and basement of the building should differentiate between those
parts over which the tenant has full and exclusive use, where he could be
expected to carry out maintenance and repair without reference to other parties,
and the common parts where the identification of the work to be done and
carrying out of that work would be a matter of agreement between the landlord
and the other proprietor(s) of the tenement.
Further, it is difficult to see why in such a Lease a tenant of one part
only of the building should be expected to assume the direct and complete
responsibility for maintenance and repair of the common parts. That is a responsibility which one would
expect to see shared with the proprietor(s) or tenants of other parts of the
building.
[10] I approach the construction of sub-clause (iv) of Clause THIRD
of the Head Lease, therefore, on the footing that although the argument
advanced by Mr MacColl is a plausible one on the strict meaning of the
words used in the sub-clause, it is not a meaning which would necessarily
attract itself to reasonable persons in the position of the parties to the Head
Lease. In other words, it is not a
construction which makes a great deal of commercial sense. Nor, in my opinion, is it the only literal
construction that can be placed upon that sub-clause. Thus, whilst it is possible to talk of an
obligation to maintain and repair the ground floor shop and basement, those
being physical premises capable of maintenance and
repair, it is not possible to talk in the same sense of an obligation to maintain
and repair "a right of common property".
The distinction is to be drawn between the common property itself, which
of course could be made the subject of a repair and maintenance agreement, and
the right of common property, which is a right to the enjoyment of property
along with others. How can such "a right"
be maintained or repaired? To my mind it
is this difference which underpins the distinction between sub-clauses (iv) and
(v). Sub-clause (v) is focused on the
common property. It is anticipated that
the landlord may have to pay for maintenance, repairs, rebuilding, etc, of all
or part of the common property. He will
no doubt bear only a proportion of those costs and expenses. The tenant is required under
sub-clause (v) to pay the landlord the amount of the landlord's
expenditure in that respect. That seems
to me to be the most obvious way in which to fix the tenant with responsibility
for repairs to common property. It is
the way the parties have agreed in this case.
[11] Accordingly, therefore, I am not persuaded by Mr MacColl's
argument for the pursuer as to the proper interpretation of sub-clauses (iv)
and (v) of the Head Lease. I shall allow
a proof before answer as between pursuer and defender, reserving all pleas.
The
Sub-Lease
[12] The arguments under the Sub-Lease took a similar form to those
under the Head Lease. However, there
were differences between the terms of the two documents. For example, in the Sub-Lease the tenant
(referred to therein as "the Landlord") lets to the sub-tenant (referred to as
"the Tenant") "the premises". The
expression "the premises" is defined in Clause THREE(v) of the Sub-Lease
as follows:
"(5) The
expression 'the premises' shall mean ALL and WHOLE the subjects known as and
forming the ground floor and basement premises at Eighteen High Street in the
Burgh of Paisley and County of Renfrew described in the Disposition by A.L.
Scott & Son Limited in favour of The Prudential Assurance Company Limited
dated Nineteenth September and recorded in the Division of the General Register
of Sasines applicable to the County of Renfrew on Fifth October both nineteen
hundred and sixty three, being the subjects leased in terms of the Head Lease
(as hereinafter defined) and (insofar as let by the Head Lease) including the
fixtures and fittings therein so far as belonging to the Landlord or the Head
Landlord".
Mr Campbell, who appeared for
the third party, pointed out that that definition did not incorporate from the
Head Lease the precise expression "the subjects let". Instead it referred to "the subjects leased
in terms of the Head Lease". He
suggested that this was a deliberate omission to use the term of art used and
defined in the Head Lease. That may be
so, but taking the clause as a whole, it does not seem to me that the meaning
of "the premises" in the Sub-Lease differs in any material respect from the
meaning of "the subjects let" in the Head Lease.
[13] The obligations on the sub-tenant are set out in Clause FIVE of
the Sub-Lease. The material parts are
sub-clauses (3) and (5). They provide as
follows:
"(3) Items of
Common Use or Benefit
To pay to the
Landlord within seven days of demand a fair proportion (to be determined by the
Landlord's Surveyor acting properly and reasonably so far as concerns matters
of fact whose determination will be binding on the Landlord and the Tenant save
in the case of manifest error) of all expenses (including the proper and
reasonable charges of the factors (if any) of the building of which the
premises form part (but excluding any charge incurred in the collection of
rent) incurred by the Landlord in the supplying of any services, facilities or
amenities whatsoever to the premises or in the cleaning, painting, lighting,
repairing, maintaining, and where necessary renewing or rebuilding of any part
of the premises which is not within the Tenant's liability under Clause 5(6)
hereof or in the maintenance, repair, cleaning, and where necessary renewal,
remaking and rebuilding of all roads, ways, passages, pavements, conduits,
party walls, party structures and other items which may belong to or be used by
or for the premises in common with other premises, and of any expense incurred
by the Landlord in complying with any requirements of a competent authority
relating to the premises or any part thereof, and to keep the Landlord
indemnified against such proportion of such expenses".
This approximates to Clause
THIRD(v) of the Head Lease. Clause 3(6)
approximates to Clause THIRD(iv) of the Head Lease. It is in the following terms:
"(6) Repairs
(a) To keep the
whole of the 'premises' clean and tidy and clear of rubbish and in good and
substantial repair and condition and as often as may be necessary to rebuild
reinstate or replace the premises or any part thereof to the Landlord's
reasonable satisfaction so that the Tenant's liability shall not be limited by
the age or state of the premises (damage by any of the insured risks excepted
save to the extent that ...)".
[14] Although I heard careful argument from Mr Campbell and
Mr Hawkes in respect of the proper meaning to be given to these clauses,
this argument took place largely against the background that Mr Hawkes, on
behalf of the defender, was mainly concerned to cover the possibility that the
defender might be liable to the pursuer for the whole of the works set out in
the Schedule of Dilapidations, including the works to the common parts. He therefore sought to stress how unlikely it
would be that a party in the position of the defender, a tenant under the Head
Lease, should intend to leave himself liable to the landlord for repairs and
maintenance to the common parts without extracting a similar obligation from
the sub-tenant. For his part,
Mr Campbell was concerned to emphasise how under the Sub-Lease, whatever
might be the position under the Head Lease, the obligation on the sub-tenant
did not extend to maintaining and repairing the common parts, but only to
making payment in respect thereof under Clause 5(3). Standing my decision about the Head Lease,
this argument becomes less pressing, since the defender cannot realistically
seek to pass on to the third party more than that for which he is liable to the
pursuer. Suffice it to say, therefore,
that my reason for rejecting the pursuer's argument in respect of the Head
Lease would have led me to reject the defender's argument in respect of the
Sub-Lease.
[15] I should add that, in addition to relying upon Clause 5(3) and
(6), Mr Hawkes also relied upon Clause 5(25) which he described as a sweep-up
clause. This provides, so far as
material, as follows:
"(25) Head
Lease Obligations
Subject as
aftermentioned, (1) to perform and observe the Lessee's obligations (other than
the obligation to pay rent or other sums) and the restrictions referred to in
the Head Lease so far as they relate to the premises or the building of which
the premises form part ('the building') ...."
Mr Hawkes submitted that whether or
not the sub-tenants were caught by Clause 5(6), they were obliged in terms
of Clause 5(25) to perform and observe the tenant's obligations referred to in
the Head Lease so far as they related to the premises or the building of which
the premises formed part. Whilst the
reference to "the building of which the premises form part", might lend some
support for Mr Campbell's argument that "the premises" had a narrower
meaning, it made it clear that the obligations on the sub-tenant extended to
the whole of the tenant's obligations in respect of the common parts. Mr Campbell responded by suggesting that a proviso
(which I have not quoted) showed that the obligation was only an obligation to
pay by contributing to the cost.
However, Mr Hawkes in response pointed out that that proviso dealt only
with restoring and rebuilding the common parts, rather than ordinary
obligations of maintenance and repair. I
consider that Mr Hawkes was right in drawing this distinction. Accordingly, had the point been relevant, I
would have held on the strength of Clause 5(25) that the obligations of the sub-tenant
matched those of the tenant under the Head Lease. As it is, however, the point does not arise.
[16] In those circumstances I shall allow a proof before answer as
between the defender and the third party, reserving all pleas.
Disposal
[17] I shall allow both the defender and the third party a proof
before answer of their respective averments on Record.
