Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 76
CA94/10	OPINION OF LORD GLENNIE in the cause CO-OPERATIVE INSURANCE SOCIETY LIMITED Pursuers; against FIFE COUNCIL Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuers: MacColl; Tods Murray

Defender: Ellis, Q.C., Balfour + Manson LLP

11 May 2011

[1] The pursuers and the defenders are respectively landlords and tenants of subjects known as Unicorn House, The Kingdom Centre, Glenrothes ("the subjects") under a lease dated 21 August and 11 September 1981 ("the lease"). The lease was originally between other parties but it is agreed that their interests have since become vest in the pursuers and the defenders. The lease was for a period of just under 25 years, from 17 August 1981 until 1 August 2006, but was subsequently extended by agreement to 30 November 2006.

[2] The pursuers complain that the defenders were in breach of their repairing and maintenance obligations under the lease; and that when the defenders vacated the subjects on 30 November 2006 they failed to surrender them in a state and condition consistent in all respects with there having been due performance by them of their obligations under the lease. They seek damages in a sum in excess of £1.3 million. They have produced a Dilapidations Report identifying each of the wants of repair which, they say, have arisen as a result of the defenders' breach of the lease.

[3] In the main, the defenders dispute liability, though agreement has been reached on some matters. Amongst other points, the defenders contend that they are not liable for "extraordinary repairs". This part of their case is made at the end of Answer 8, in which they say the following:

"Separatim and in any event, many of the alleged wants of repair identified by the pursuers arise by virtue of the impending expiry of the anticipated lifespan of certain component parts of the subjects and also involve wholesale replacement of substantial parts. Such repairs are extraordinary repairs at common law. Properly construed the lease does not impose liability on the defenders for such repairs. The parties to the lease at the date of its execution would have been aware that the reasonably anticipated lifespan of certain component parts of the building was not materially greater than the term of the lease. Had they intended that the tenant was to be obliged to replace all such components at the ish it is likely that they would have made express and unambiguous provision to that effect. They did not do so. ...."

The repairs which the defenders categorise as extraordinary repairs for which they are not responsible are identified in a Schedule.

[4] The matter came before the court for debate as to the relevancy of the defenders' averments that they are not liable for extraordinary repairs. The pursuers sought to have those averments excluded from probation. It was recognised that, though it would not resolve the whole case, a decision on the point might significantly narrow the scope of the dispute. For the purpose of the debate, it was accepted that I should treat pro veritate the defenders' averments in Answer 8. That includes, in particular, the averment as to the parties' awareness that the reasonably anticipated lifespan of certain component parts of the building was not materially greater than the term of the lease.

[5] In terms of Clause (FIRST) of the lease, the subjects are expressly stated to include:

"the whole of the external walls and roofs within which the said offices and others are contained and extending to the centre of all vertical and horizontal structures separating the leased subjects from adjoining premises on a side or below."

By Clause (SIXTH), the tenants bind themselves to perform the obligations set out in the First Schedule to the Lease. Paragraph (Three) thereof imposes an obligation on the tenants:

"At their own cost and expense to repair and keep in good and substantial repair and maintained, renewed and cleansed in every respect all to the satisfaction of the Landlords the leased subjects and all additions thereto and all sanitary, water and mechanical and electrical apparatus, and equipment therein or thereon, and further at the joint and cost and expense of the Landlords and the Tenants to repair, maintain, and renew all vertical or horizontal structures separating the leased subjects from the Landlords' adjoining premises on any side or below. ..."

Paragraph (Six) of the First Schedule imposes obligations upon the tenants to leave the subjects in good condition at the end of the Lease. In terms of that paragraph, they are required:

"At the expiry or sooner termination of the Lease ... notwithstanding any law or practice to the contrary to surrender to the Landlords the leased subjects together with all additions and improvements made thereto and all fixtures (other than trade or tenant's fixtures affixed by the Tenants or any sub-tenant) in or upon the leased subjects or which during the Lease may have been affixed or fastened to or upon the same and that in such state and condition but shall in all respects be consistent with a full and due performance by the Tenants of the obligations herein contained, and without prejudice to the foregoing generality at their own cost and expense to repair and make good to the satisfaction of the Landlords all damage including damage to paintwork caused by the removal of trade or Tenant's fixtures affixed to the leased subjects by the Tenants or any sub-tenant."

I shall refer to certain other clauses in due course.

[6] Mr MacColl, who appeared for the pursuers, explained that, at common law, a tenant would normally only be liable under a lease for "ordinary repairs" while responsibility for "extraordinary repairs", such as the rebuilding or renewal of the subjects and making them wind and watertight, would normally lie with the landlord: cf. Johnstone v Hughan (1894) 21 R. 777. But he submitted that the common law liability for repairs was relevant only in so far as the terms of the lease did not themselves deal with the obligations arising in respect of repairs: cf. Johnstone v Hughan (supra), Turner's Trustees v Steele (1900) 2 F 363, and Sharp v Thomson 1930 SC 1092. A lease might place the obligation to carry out extraordinary repairs upon the tenant, but it would have to do so by clear stipulation or necessary inference: see House of Fraser plc v Prudential Assurance Company Limited 1993 SLT 519, 520H (OH) and 1994 SLT 416 (IH), Taylor Woodrow Property Company Limited v Strathclyde Regional Council 1996 GWD 7-397 and West Castle Properties Limited v Scottish Ministers 2004 SCLR 899. The lease in the present case did impose such obligations on the tenant. He relied in particular on the width of the definition of the subjects and the inclusion of renewal within the obligations placed upon the tenants. As to the significance of the word renewal, he referred to the use of the word by Lord Anderson in Sharp v Thomson (supra). The obligation on the tenants under paragraph (Three) of the First Schedule, viz. to repair the subjects and to keep them in good and substantial repair and "maintained, renewed and cleansed in every respect", extended to the whole of the external walls and roof, and was an obligation to renew as well as to repair. This was repeated later in paragraph (Three) of the First Schedule, where an obligation was imposed on the tenants to repair, maintain, and renew "all vertical or horizontal structures separating the leased subjects from the Landlords' adjoining premises on any side or below." In those circumstances, he submitted, the lease clearly imposed obligations upon the defenders which were wider than would be consistent with an obligation only in respect of ordinary repairs.

[6] Mr MacColl also pointed to certain other provisions of the lease. In particular, he noted the tenant's obligation in paragraph (Two) of the First Schedule:

"To comply with all obligations imposed by any Act or Acts of Parliament, statutory instruments or the rules, byelaws, regulations and notices of any Local or other authority for the time being in force and do and execute or cause to be done and executed all such works, acts, deeds, matters and things as under or by virtue of any such Act or Acts, statutory instruments, rules, byelaws, regulations or notices are or shall, be properly directed or necessary to be done or executed upon or in respect of the leased subjects or any part thereof whether by the owner, Landlord, Tenant or occupier and at all times to keep the Landlords indemnified against all claims, demands and liability in respect thereof."

Mr MacColl gave as an illustration the possibility of a statutory notice being served by the local authority requiring repairs to the roof or to some major structural damage. That provision put the obligation to comply with such a notice on the tenant. Whilst noting that the insuring provision in Clause (SEVENTH) of the lease placed a burden on the landlords to insure the leased subjects against, in effect, all insurable risks, and, in the event of destruction or damage by a risk covered by that insurance, to expend the monies received by them under the insurance in making good as soon as reasonably possible all damage so caused, making up any deficiency out of their own monies, he submitted that that had to be read in the context of paragraph (Eight) of the First Schedule, which placed an obligation on the tenants to repay and reimburse the landlords on demand all insurance premiums paid by the landlords in effecting such insurance. The point, therefore, did not militate against his construction; indeed, it supported his case, since the whole burden of insuring the subjects was ultimately placed on the tenants.

[7] For the defenders, Mr Ellis, Q.C., suggested that there was no particular touchstone as to when a repair was to be regarded as "extraordinary". Was it to be judged, he asked, by reference to the extent (and cost) of the repair, or by reference to the cause of the disrepair? He submitted that there were two questions in the present case which required to be addressed. First, did the parties intend to innovate on the common law as regards liability for extraordinary repairs? Secondly, if they did so intend, where did they intend to draw the line between ordinary and extraordinary repairs? He submitted that the answer to the first question was: No. In those circumstances, the second question did not arise. He submitted that Mr MacColl was wrong to place so much emphasis on the word "renewed" in paragraph (Third) of the First Schedule. The obligation was not "to renew" but, rather, to "keep in good and substantial repair and maintained, renewed and cleansed in every respect". Maintenance, renewal and cleansing were all facets of good and substantial repair. Many ordinary repairs involved some renewal. An obligation to carry out ordinary repairs might well be expressed in terms of renewing to the extent necessary. Although the word "renewal" was used by Lord Anderson in Sharp v Thomson in the context of a liability for extraordinary repairs, only he had used it. Put bluntly, the word "renewed" would not bear the weight sought to be placed upon it. It was the sort of "fine distinction" deprecated by Lord Cullen in House of Fraser. It was too fine a distinction to justify reversing the common law position.

[8] Looking at the matter more generally, Mr Ellis noted that this was a 25 year lease. The landlords had enjoyed the rent for that building for 25 years. The defenders offered to prove that 25 years was the reasonably anticipated lifespan of the building, or at least of certain component parts of it. Against this background, to construe the lease in such a manner that, after 25 years, the tenants had to give back a building which had been "renewed" in all material respects, would amount to construing it in a way which, in effect, required the tenants to give back to the landlords a new building which they could exploit for a further 25 years without any cost to themselves. That would be an extraordinary and unreasonable construction. It would require very clear wording if there were to be imposed on the tenants an obligation to renew an age-expired building.

[9] Despite Mr MacColl's able submissions, I am not persuaded that the lease imposes such a liability on the tenants. Mr MacColl's main argument was based upon the use of the word "renewed" in the repairing obligation in paragraph (Seventh) of the First Schedule to the Lease, coupled with the description of the subjects as including the whole exterior of the building. As he pointed out, the word renewal is used in the Opinion of Lord Anderson in Sharp v Thomson at p.1097 in contra-distinction to repair, to differentiate between a liability for ordinary repairs and one for extraordinary repairs. The relevant passage in his Opinion is as follows:

"Mr Clyde suggested a test of liability which I am prepared to accept. He maintained that, if what had to be done to the lade to make good the damage amounted to restoration or renewal as contrasted with mere repair, the defender would not be bound. It is no easy matter to say where repair ends and renewal begins, but in the present case I am of opinion that the lade is partially destroyed, and that it must be restored or renewed." (emphasis added)

The distinction being drawn in that passage appears to relate to the scale of the repairs. The lade had been completely destroyed and required to be completely renewed. But the Opinions in that case suggest that the scale of the repairs is not the only touchstone for attributing liability. Further, as Mr Ellis pointed out, only Lord Anderson expressed the distinction in this way. Lord Ormidale, at p.1099, identified the relevant distinction as one between "a tenant's repair" and "a landlord's renewal". He appears to have equated this with the distinction between ordinary and extraordinary repairs, but in my opinion he was using such expressions as a means of identifying the pertinent question rather than as providing the answer. The Lord Justice-Clerk (Alness) founded for the tenant on the basis that the clause made him liable for ordinary but not extraordinary repairs and that the repairs in that case were extraordinary repairs. He thought that the relevant considerations were not only the effect of the occurrence, and the magnitude of the work needed to put right the damage, but also its cause. The concept of "renewal" might address the former, but it has nothing to do with the latter.

[10] I shall come back to consider Sharp v Thomson in more detail in due course. It is useful, first, to consider a number of the cases to which I have referred. Not only do those cases all recognise the distinction at common law between a tenant's liability for ordinary repairs and the landlord's responsibility for extraordinary repairs, but they also identify various considerations which have provided assistance in applying that distinction to that facts of each particular case.

[11] In Napier v Ferrier (1847) 9D 1354 the lease of a house for a term of five years imposed on the tenant an obligation to keep the premises "in good and sufficient repair and condition during the lease, and to leave them so at the termination thereof ...". An issue arose because of the condition of the premises at the date of entry, the tenant seeking to recover from the landlord the cost of repairs which he carried out. These included repairs to the joists in the wall of various rooms, the ends of which were "more or less destroyed, being in an advanced state of decomposition", repairs to the roof, where missing and broken slates allowed rainwater to penetrate the house, and replacement of lead gutters at the back and front of the house, the existing lead gutters being cracked and "in a deplorable condition". It was held in the Inner House that the tenant was only bound to make ordinary repairs, but not such extraordinary repairs as amounted, in effect, to re-construction of the premises or part of them. The repairs to the roof and gutters were ordinary repairs, for which the tenant was liable in terms of the lease, but the repairs to the joists were not ordinary repairs and the landlord was liable for the cost. Having considered the position of the repairs to the roof and gutters, which he had no hesitation in holding "fall under the category of ordinary repairs", the Lord President (Boyle) dealt with the position of the joists, which were in a state of decomposition and were the cause of the greater part of the cost:. He said this (at p.1359):

"I make a complete separation, therefore, between ordinary repairs and this decay, or extraordinary repairs. We are enabled to extract from the decision quoted by Baron Hume, this general principle, that where a party undertakes an obligation to put the premises in good and sufficient repair, it covers all things that can come under ordinary repairs. But when it so happens that the floors are going - that the ends or centre of the joists are in a state of decay, I take the case to be one not covered by that obligation. Put the case, for example, that might have been raised as to the house of our venerable friend Lord Eldin. Suppose it had been let to a tenant, under an obligation to keep it in repair during the lease, and that it had been discovered that the joisting of the drawing-floor was in such a condition as not to be able to support any weight, but would go to pieces, as occurred, would the tenant not be entitled to say, this is a damnum fatale, for which he was not liable; but that, on the contrary, the obligation to do so rested with the landlord - this being an extraordinary repair.

I hold the principle of the law to be as clear as the sun at noon-day, that the landlord is liable for extraordinary repairs. The reports here certify that the house could not be inhabited with safety, unless these extraordinary repairs were made."

Lord Mackenzie drew the same distinction (at p.1359):

"The ordinary obligation on the tenant is, to keep the house in good and sufficient repair. ..."

Referring to the right given to the tenant to get possession before the date of entry to enable him to make repairs and improvements, he continued:

"I do not consider that he was bound to make improvements; but he was bound to make some repairs - that is, ordinary repairs - for the repairs he was bound to make must have a limit. Suppose the walls were to tumble down, he is not surely bound to put in new walls. It does not appear what amount of lead was necessary; and if it should be held necessary for the tenant, before this repair could be made, that new lead should be substituted for the old, I would have had some doubt of that. I just agree with your Lordship, that only reasonable ordinary repairs can be imposed on the tenant under this lease. But joisting and flooring of the rooms are not ordinary repairs. That is reconstruction, far beyond the mark. ..."

There was then further argument, after which Lord Mackenzie remarked (at p.1360):

"If the decay there is not dry-rot, what is it? It is at least that dry-rot to which all beams are liable, namely the decay of time. If it were so, no one supposes the tenant would be bound to put in new beams. It is never intended that the tenant should repair that."

Lord Fullerton put his decision on broader grounds, but, on this way of putting the case, agreed that the obligation on the tenant

"... could not extend to those substantial repairs required by essential defects of the subjects let, which rendered it insecure, and totally unfit for the purposes of habitation."

These passages suggest that, while it is relevant to have regard to the extent of the necessary repairs (c.f. the references to "reconstruction"), it is also relevant to consider the nature of the defect (e.g. a defect rendering the property insecure, or uninhabitable with safety) and the cause (e.g. "decay of time"). While the cause of the defect may be decay over a period of time, the courts have also made it clear in a number of cases that the tenant's usual obligation to repair does not include cases where the damage is caused by a damnum fatale, some accident occurring without the fault of the tenant: see Duff v Fleming (1870) 8R 769 where the tenant was not liable to repair premises which were damaged by fire, to the extent that, although they were not wholly destroyed, the tenant's beneficial enjoyment had entirely ceased.

[12] In Johnstone v Hughan (1894) 21R 777 the tenant of a farm, whose lease imposed on him an obligation to maintain the buildings "in good and sufficient repair" during the currency of the lease, brought an action against his landlord claiming damages on the ground that for some five years he had not had the use of the granary and piggery on the farm, those buildings having become "unfit to be repaired ... on account of decay occasioned by the lapse of time". The issue was as to whether such repairs were covered by the tenant's repairing obligation or were an obligation placed on the landlord. It was held that the action was relevant, since the landlord was liable for extraordinary repairs necessitated by natural decay. At p.779, the Lord President (Robertson) said this:

"The case here is that the untenantable condition of the granary and piggery was caused by decay, - that is to say, that it was not caused by the absence of timely repairs, such as fell to the tenant to make. In such circumstances there can be no doubt that the landlord is prima facie responsible, and it is going too far to say that, because the landlord has undertaken certain specified operations by way of renewals, that this completely exonerates him for the future from doing anything more to counteract the dilapidation of the premises by decay."

Lord Adam, in his Opinion, recognised that the first port of call was to be found in the terms of the lease itself. He said this (at p.780):

"In so far as the lease deals with these matters it is, of course, conclusive, but beyond these obligations there are other legal obligations on both sides with which the lease did not deal. Now, it appears that about the seventh year of the lease the granary and piggery on the farm, by no neglect of the tenant, got into a condition of natural decay, and the question is, What is the legal obligation with regard to the repair of these buildings? I am of opinion that when there is a case of what may be called extraordinary repairs (as they are called by Lord President Boyle in the case of Broadwood), the obligation to restore is on the landlord. Now, that is the case here, and therefore, I think, there is a relevant ground of damage stated."

Of relevance here is the recognition that the concept of natural decay does not necessarily provide a clear dividing line between ordinary and extraordinary repairs. The tenant was obliged to maintain the buildings in good and sufficient repair during the currency of the lease - he could not claim to be relieved from liability to repair if the necessity for repairs, even to defects caused by natural decay, was caused by his own neglect, in breach of his covenant, to effect timely maintenance and repairs.

[13] That distinction was addressed in Turner's Trustees v Steel (1900) 2M 363. In that case the tenant was obliged in terms of the lease to "keep all internal fittings in good order and repair, and to leave the said premises in good tenantable condition and repair at the expiry of this tack." A dispute arose between landlord and tenant as to whose responsibility it was to execute repairs to the roof, through which wind and rain were entering so as to prevent the tenant, who used the attic part as a lodging house, from letting out 20 beds throughout the winter months. The tenant withheld rent in an amount equivalent to the damage suffered by her and the landlord sought to sequestrate for non-payment of rent. It was held that the tenant's defence, that she was entitled to retain in abatement of the rent the amount of the damage she had suffered, was irrelevant because of the particular terms of the lease. Lord Adam explained the position in this way (at p.367):

"The question turns on the passage in the lease in which the defender accepted the premises "as in proper tenantable condition and repair," and bound and obliged herself "to leave the said premises in good tenantable condition and repair at the expiry of this tack." Now, the meaning of that provision is clearly that the defender is under obligation to keep the premises in good tenantable condition and repair. It is said that the obligation imposed on the tenant does not exclude the obligation of the landlord at common law to keep the premises wind and water tight. I am of opinion that it does. I quite admit that the obligation of the tenant does not extend to all necessary repairs, but it applies to all ordinary repairs, and there is nothing on record to shew that the want of ordinary repairs is not the cause of the whole mischief complained of. I think therefore that the Sheriff has rightly disposed of the case. He finds the defence irrelevant, and I think it is irrelevant, because there is no statement in the defences to shew why the tenant's obligation should not apply to the case, - that is to say, nothing is stated to shew that the necessity for repairs did not arise from ordinary circumstances, but was due to some extraordinary cause, as might be the case in a long lease where the premises became completely dilapidated from the lapse of time and required to be renewed." (emphasis added)

Lord M'Laren agreed. He considered that while there was no doubt as to the landlord's obligation to keep a house let by him wind and water tight,

"... yet, when a tenant accepts a house as in tenantable condition and binds himself to leave it in the like state, prima facie this is exclusive of the landlord's obligation except for extraordinary repairs. There might be other clauses in the lease to put a different meaning on the words used, but I am of opinion that the mere addition of an obligation to keep internal fittings in good repair should have that effect. The plain meaning of the obligation undertaken by the tenant is that she undertakes to deliver the subjects in good repair at the end of the lease, and this obligation can only be fulfilled by the tenant making the necessary repairs."

It is to be inferred that Lord M'Laren considered the necessary repairs to be ordinary repairs, not extraordinary repairs for which the landlord would have been liable. Lord Kinnear also agreed. At p.368, he emphasised that the tenant had accepted that the subjects had been handed over to her in good condition. That, he said, was difficult to reconcile with a complaint against the landlord that they came, during the course of a short lease, to be in a state of disrepair for which the landlord was liable:

"If in the course of a short lease premises, which are in good condition at the beginning, come to be in disrepair, prima facie that would seem to be owing to the failure of the person bound to keep them in good repair during the course of the lease." (emphasis added)

He went on to say:

"I quite assent to the view of Lord Adam that, notwithstanding any obligation of this kind being laid on the tenant, there might be a condition of disrepair for which the landlord might be held responsible, - for example, where the cause of disrepair is an extraordinary accident or a latent defect, or the inevitable deterioration of the structure owing to the long lapse of time, for which, as between the contracting parties, the landlord might be liable. But then, if the cause of the disrepair here had been of such a kind, it would have been for the defender to aver that ...".

[14] The case of Davidson v Logan 1908 SC 350 involved reduction of an arbiter's award on the ground that he had wrongly valued the landlord's obligation to repair by reference to the repairing obligations placed on the tenant. The details do not matter for present purposes. In the course of considering the arguments, Lord Low said this (at p.365):

"It is beyond dispute that the obligation which lies upon a landlord at common law to put buildings and fences at the commencement of a lease in tenantable condition and repair involves more and is more onerous than the obligation which lies upon the tenant to leave these subjects in like condition and repair at the end of the lease. To take one example out of many which might be given-If a fence were, at the beginning of a lease, worn out, so that it was no longer capable of being repaired, the landlord would be bound to renew it, but no such obligation would rest upon a tenant at the end of a lease, because he is not responsible for the effects of inevitable wear and tear, and is not bound to renew what, from that cause, has become worn out."

[15] I have already referred to Sharp v Thomson 1930 SC 1092. The lease in that case was an agricultural lease which provided that the tenant would accept "the whole lades, dams, sluices, aqueducts, and water courses ... as in a good and sufficient state of repair and cleanliness and uphold these in the same, and shall leave them in a like good state of repair at his removal". The clause did not use the word "renew" or any variant of it. The lade, which brought water to the threshing mill, was damaged and rendered useless owing to the displacement of its bank, caused by a fall of trees which were blown down in a storm. Neither the landlord nor the tenant repaired the damage. The tenant claimed that it was the landlord's obligation to repair the lade and claimed to be entitled to an abatement of rent as he had been deprived of the full enjoyment of the subjects. The landlord's claim for the rent withheld by the tenant failed. In para.[9] above I quoted the passage in the Opinion of Lord Anderson relied on by Mr MacColl. It is useful, in my opinion, to see that passage in context. At p.1096, Lord Anderson made it clear that

"... the common law obligations of parties to a lease may always be modified by conventional stipulations, and the obligation to restore a subject of let accidentally destroyed may be conventionally laid on either of the parties."

He went on at p.1097 to consider certain characteristics of the damage that might place the incidence of liability on one party or the other, considering in turn the origin of the damage, its extent and its nature:

"The origin of the damage was accidental and unforeseen, and the defender [the tenant] contended that the parties did not contemplate that he would be liable to make good damage so occasioned. The Sheriff-substitute makes it one of the grounds of his judgment against the defender that the gale which did the mischief was not an extraordinary tempest, but an ordinary storm of wind. ... The proper criterion of liability seems to me to be, not whether the cause of the damage was ordinary or extraordinary, but whether it was accidental and unanticipated. I am satisfied that the occurrence of October 1926 was fortuitous and outwith the contemplation of the parties.

As regards the extent of the damage, it is obvious that, to warrant a claim for an abatement, it must be considerable, and that the consequent cost of making good the damage must be substantial. The defender maintains that damage so substantial as to justify a claim for abatement is not covered by the stipulation, as it was not intended or contemplated by the parties that the cost of remedying such damage should fall on the tenant. The Sheriff-substitute takes the view that the cost of making good the damage in 1926 was moderate, and for this reason thinks that it should have been borne by the defender. I am unable to agree that, looking to the amount of the rent, an expenditure of £25, exclusive of cartage can properly be regarded as moderate. I am satisfied that the parties never contemplated that the defender should expend in any one year, for the purpose of repairing the lade, so large a sum as £25.

Finally, as to the nature of the damage to which the stipulation was meant to apply, the defender maintained that the stipulation was not designed to lay on the tenant a greater burden than that of making good the effects of ordinary user of the lade, and was not meant to cover the case of extraordinary damage necessitating exceptionally heavy cost of repair. That contention seems to me to be well founded, ... Mr Clyde suggested a test of liability which I am prepared to accept. He maintained that, if what had to be done to the lade to make good the damage amounted to restoration or renewal as contrasted with mere repair, the defender would not be bound. It is no easy matter to say where repair ends and renewal begins, but in the present case I am of opinion that the lade is partially destroyed, and that it must be restored or renewed. If the function of the lade of supplying water to the mill-wheel had merely been impaired - if the lade, owing to growth of weeds, was capable of conveying water, but not in sufficient body - I should hold that it called for repair by weeding, and that the tenant was bound to execute this repair. But if the lade is so damaged that it cannot function at all - that it is unfit to convey any water to the mill - then I am of opinion that it calls for restoration or renewal, and, accordingly, that the tenant is not bound by the stipulation to repair.

I therefore reach the conclusion that the defender has succeeded in discharging the burden of proof laid upon him, and has made good his claim to some abatement of rent."

Lord Ormidale said the following (at p.1099):

"I regard the question, which is one of mixed law and fact, as a narrow one. It appears to me in the end to resolve itself into this, whether the work required to make the lade again efficient involved a tenant's repair or a landlord's renewal of the subject. Looked at from another angle it might be asked - Were the necessary repairs just ordinary repairs or were they extraordinary repairs? The answer to these questions must be primarily found in a consideration of the cause which rendered them necessary.

Lord Justice-Clerk (Alness) said (at p.1101):

"The only question argued in this case was whether the defender (the tenant) is entitled to an abatement of the rent claimed by the pursuer (the landlord). Such a question must always, I think, depend on circumstances, and I should hesitate long before attempting to lay down a general rule which, when applied, must necessarily afford a solution of the problem. That course does not appear to me to be possible. What, then, are the circumstances in this case? They relate (1) to the obligation undertaken by the defender, and (2) to the occurrence which gave rise to his claim for abatement.

(1) As regards the defender's obligation, it is couched in familiar terms. It is that he shall maintain and uphold the whole lades, dams, sluices, aqueducts, and water-courses of and in connexion with the subjects let in a good and sufficient state of repair and cleanliness . What is the fair and reasonable interpretation of these words? What must be deemed to have been the intendment of the parties when they entered into that contract? These are the questions which require an answer.

It appears to me that several of the cases cited at the debate materially assist the Court in furnishing the necessary answer. ..."

He then referred Napier v Ferrier, Turner's Trustees and Muir v M'Intyres 14 R 270, in the last of which the Lord President had said that the tenant was not liable if the damage was caused "through some unforeseen calamity which the tenant was not able to prevent", and continued

"These cases appear to establish that such a clause as that which I am considering applies to ordinary but not to extraordinary repairs, and that, if, through no fault of the tenant, extraordinary repairs become necessary, he is entitled to an abatement of rent. So much for the clause which embodies the defender's obligation.

(2) What, then, are the circumstances which in this case give rise to the defender's claim to abatement? They are that, in the course of a hurricane, which, though not unprecedented, was severe, certain trees on his farm were blown down, and that, as a consequence of their fall, they destroyed 8 yards or thereby of the mill lade, thereby rendering it useless for its purpose, and entailing an expenditure of £25 to repair the damage so caused. The net result of the happening, moreover, was to destroy the value of the defender's farm as an arable subject.

Now, I cannot think that such a situation can be deemed to have been within the contemplation of the parties to the contract. That is so whether one has regard to the cause or to the effect of the occurrence. The cause was not normal, but abnormal. The cause was not to be found in ordinary wear and tear, but in an accident caused by an outside agency. Catastrophes such as that were not, in my judgment, in contemplation of the parties to the contract. They contemplated and provided for happenings due to ordinary causes, but not for happenings due to extraordinary causes. This, in my judgment, was an extraordinary cause. Again, as regards effect, the resulting damage was, says the Sheriff-substitute, "substantial." Here no doubt the question must always be one of degree, and I quite recognise that nice distinctions may, in cases which one might figure, have to be drawn. But I cannot regard a result which deprived the defender of the use of the mill lade, which robbed his farm of all value as an arable subject, and which involved an expenditure of £25 to repair - the rent of the farm being £135 - as insubstantial or trivial in its character. Of course there was not complete destruction of the subject, else the claim would be, not for abatement, but for abandonment. And, again, I recognise that the question as to the point at which the right to claim abatement arises may often prove to be a nice and troublesome one.

This case is, however, quite special; and, without seeking to lay down any general rule, I am prepared to affirm that damage caused by an accident, and resulting in loss so serious as that caused to the defender here, cannot, having regard to the authorities, or indeed having regard to the first principles of equity, be deemed to fall upon him under his contract. If that be so, cadit quœstio; for I understood Mr Clyde to admit that, if he drifted from the moorings which the contract provided, he would, to continue the metaphor, be submerged.

In all three Opinions issued in the case, the question whether the repairs were ordinary or extraordinary repairs is answered on the facts by a considerarion of three matters, the extent of the repairs necessary to be effected, the nature and extent of the damage, and the cause of the damage. Although, as aleady noted, Lord Anderson distinguished between repair and renewal in the context of considering the nature and extent of the damage, it is clear that all the judges in that case took the view that that was not the only criterion by which liability for the repairs could be ascertained.

[16] Turning to more recent authority, the distinction between"ordinary repairs" and "extraordinary repairs" was described by Lord Cullen in House of Fraser v Prudential Assurance Ltd. 1993 SLT 519 (at p.520H-J) as

"well established in the law of Scotland in the context of the interpretation of a stipulation in an urban lease that the tenant should be responsible for carrying out repairs".

In that case the tenants, who were obliged to re-imburse the landlords a proportionate part of sums expended by them on keeping the subjects in good and substantial repair, sought to avoid the consequence of that provision by arguing that the work carried out by the landlords to a retaining wall did not fall within the scope of the landlords' repairing obligations. This argument, in effect an argument that the landlords were responsible for ordinary repairs but not extraordinary repairs, an inversion of the common law position, unsurprisingly failed. In rejecting a further argument by the tenants to the effect that the work was "renewal" rather than "repair", and therefore outwith the landlords' repairing obligations, Lord Cullen emphasised that

"the Scottish courts have avoided becoming involved in fine distinctions of language in working out the scope of a stipulation that the tenant of urban property is bound to keep it in repair. Instead the broad distinction between ordinary and extraordinary repairs has provided a practical and reasonable way of expressing the distinction between the responsibilities of the parties."

He held that the work on the retaining wall fell within the scope of the landlords' obligations under the lease. A reclaiming motion was refused: 1994 SLT 416. In giving the Opinion of the Extra Division disposing of the case, Lord McCluskey pointed out (at p.419J-420B)

"that the common law, as set forth in Rankine ... and the cases referred to, does not give any very precise method of distinguishing between ordinary and extraordinary repairs. In the cases, various notions, such as foreseeability, extraordinary cause, latent defect, inevitable deterioration over time, the extent of the damage, the nature of the damage etc., are all deployedin different sets of circumstances in order to make the distinction between what, according to the circumstances of each case, fall to be treated as ordinary and what as extraordinary repairs. No clear, universally applicable principle or talisman for distinguishing between the two emerges."

Referring to a passage from the Opinion of Lord Ormidale in Sharp v Thomson (supra), he added (at p.428C):

"That passage gives a general guide ..., but neither it nor any other passage to which we were referred would enable parties to a modern commercial lease to reach ready agreement as to the borderline cases; indeed the no man's land might be very broad."

[17] The issue in this case is as to the relevancy of the defenders' averments that they are not liable for extraordinary repairs. As I have already indicated (see para.[9] above) that I am not persuaded that the terms of the repairing covenant in the present case are apt to make the tenant liable for extraordinary repairs as understood at common law. To my mind the enquiry requires to be more nuanced and fact sensitive.

[18] Looking first to the common law authorities, I respectfully agree with Lord McCluskey in House of Fraser that the decided cases do not give any very precise method of distinguishing between ordinary and extraordinary repairs. No universally acceptable principle or formula emerges for distinguishing between them. But the cases do identify the main considerations that are apt to be taken into account. As appears from the Opinion of Lord Anderson in Sharp v Thomson, these can be grouped under three broad heads: (i) the origin of the damage, (ii) its extent and (iii) its nature. The first head refers to how the damage came about. If it was caused by a fortuitous event, something unanticipated and outwith the control of either party, that would be a pointer to the repair being an extraordinary repair for which the tenant was not liable. The contrast there is with the ordinary effects of bad weather. It seems to me that the question of decay though lapse of time falls into this category, though the qualification here is that the landlord may not be held liable to repair (or replace), say, some part of the structure (be it a wall or a roof) which has collapsed or is on the point of collapse through natural wastage (something which would prima facie be an extraordinary repair) if the structure was only allowed to get into that state through neglect on the part of the tenant: see e.g. Johnstone v Hughan. The scope for argument in this area is likely to be very great - for example, the passages in the authorities to which I have referred reveal some uncertainty about how ordinary wear and tear is to be treated. The second head relates to the extent or seriousness of the damage, and the likely cost of repairs - thus, if a wall or roof collapses, it may point to the necessary repair being an extraordinary repair for which the landlord is liable, but subject to the qualification already made about the condition which caused it to collapse having come about through the tenant's own neglect. The third head relates to the nature of the damage and the necessary repair. Does it amount to total reconstruction? There is an obvious overlap with the second head, but it was under this head that Lord Anderson drew the distinction between repair and renewal.

[19] From this analysis of the common law position, it is apparent that the question of "renewal" which Mr MacColl sought to pray in aid is only one part of the picture. To argue that the use of the word "renewed" in the first part of Paragraph (Three) of the First Schedule signifies that the tenants have assumed a responsibility for all repairs which might at common law be understood to be "extraordinary repairs" seems to me to be placing an undue burden on that word and to risk taking Lord Anderson's remarks in Sharp v Thomson out of their context. If such a result had been intended, I would have expected the lease to have dealt with the question of liability for repairs by reference not only to the extent of the repair necessary (which raises the question of renewal) but also by referring in some way to the cause of the damage needing repair. The construction for which Mr MacColl contends would have the effect, as I understood him, of requiring the tenants to hand back the subjects in as good a condition as it was in when the lease commenced 25 years before. In other words, they were obliged, according to Mr MacColl, to renew parts of the structure and machinery even though they were not yet in need of repair as such, if their condition was such that they no longer had a life expectancy sufficient to enable the subjects to be leased out on similar terms for another 25 years or so. As Mr Ellis pointed out, that would go well beyond the scope of the typical repairing obligation. Whilst he accepted that the parties could agree to such an allocation of liability for maintenance, repair and renewal, if they had so intended one would have expected them to have made their intention clear. I agree with that approach. Although no particular wording is necessary to achieve this, I would note the comparison between the repairing covenant here and those in the two cases to which I refer later in this Opinion.

[20] With these considerations in mind, I turn again to the wording of Paragraph (Three) of the First Schedule. The first part of it requires the tenants

"At their own cost and expense to repair and keep in good and substantial repair and maintained, renewed and cleansed in every respect all to the satisfaction of the Landlords the leased subjects and all additions thereto and all sanitary, water and mechanical and electrical apparatus, and equipment therein or thereon ..." (emphasis added)

That wording does not, in my opinion, go beyond the common law position. There is in fact no express obligation to renew - so even if Mr MacColl is correct as to the potential significance of such an obligation, it is not there in this lease. On the contrary, in my view, the description "maintained, renewed and cleansed" is subordinate to the general purpose of the clause, descriptive of the good and substantial repair in which the subjects are to be kept. As part of the obligation to repair, and in particular the obligation to keep in good and substantial repair, which obligation I accept may go further than the bare obligation to repair (see per Lord Mackay of Drumadoon in West Castle Properties Ltd. v Scottish Ministers 2004 SCLR 899 at para [21]), the tenants may be obliged to renew certain elements in the structure, or in the machinery which forms part of the building, but that is as part of the repairing obligation and goes not further than that repairing obligation.

[21] There are, I accept, provisions in the lease, which appear to place some responsibility on the tenants for the structure. The second part of Paragraph (Three) of the First Schedule obliges the tenants

"at the joint and cost and expense of the Landlords and the Tenants to repair, maintain, and renew all vertical or horizontal structures separating the leased subjects from the Landlords' adjoining premises on any side or below. ..."

Consistently with the division of liability for party walls, this treats the tenants as entirely responsible for the structure of the subjects let to them. So also, the terms of Paragraph (Two) of the First Schedule oblige the tenant to comply with statutory notices relating to the subjects, including the structure of the subjects, and the insurance provisions in Clause (SEVENTH) and Paragraph (Eight) of the First Schedule effectively put the onus of insuring the whole of the subjects, structure and all, on the tenants. In considering any particular items in dispute, it will be necessary to have regard to all of these provisions. But they do not drive me to alter my conclusion that the terms of the lease do not make the tenants generally liable for all extraordinary as well as ordinary repairs.

[22] The only question for decision at debate is whether the defence that the tenants are not liable for various items because they are extraordinary repairs is a relevant defence. I hold that it is relevant in principle. Whether it can be made good in respect of any particular item in dispute is another matter, and in relation some of them there may be arguments based on some of the particular terms of the lease which have been discussed before me. I suspect that it may be necessary for the defenders to enlarge upon the points made in the Schedule of Dilapidations to set out in each instance where the defence of extraordinary repairs is relied upon all the circumstances which, they say, justify that plea. In addition to repelling the pursuers' plea to the relevancy, therefore, I propose to put the case out By Order to consider further procedure.

[23] I was asked by Mr Ellis to give some more general guidance on the issues. That is not easy. To my mind, having reached the conclusion that the tenants are not in principle necessarily liable for extraordinary repairs, it may be better to address the particular heads of claim piecemeal. However, for what it is worth, I note from two further decisions to which I was referred that there may be limits on the liability of tenants to renew even under a lease couched in terms which, in principle, place upon them repairing and renewal obligations going beyond the common law exclusion of liability for extraordinary repairs.

[24] The first of these cases is West Castle Properties Ltd. v Scottish Ministers 2004 SCLR 899. Clause FOURTH of the lease provided that the tenants were required "well and substantially to repair, maintain, renew, restore, cleanse and keep in the like good tenantable condition and repair" the whole of the subjects. The lease was for 25 years, and at the end of the lease the pursuers, the owners of the building, sued for the cost of carrying out certain works which they said should have been carried out by and at the expense of the tenants. The pursuers contended that the tenants were obliged to leave the premises in such condition that a new tenant embarking on a new 25 year lease would have faced the same prospect of having to repair and maintain the premises during the currency of that new lease as the defenders or their predecessors had faced at the beginnig of their lease - so that the tenants were liable for the cost of repairing and/or replacing component parts of the premises and equipment which, although still functional, did not have the same anticipated lifespans as they had had at the beginning of the original lease: see para.[40]. The tenants argued that they were obliged to carry out all "needful and necessary repairs", renewing or restoring component parts of the building only when necessary to fulfil that obligation: see para.[41]. Lord Mackay of Drumadoon did not accept either argument in full. His decision can, I think, be taken from these short extracts:

"[52] In my opinion, the provisions of clause FOURTH required the defenders to carry out an works which a prudent owner of the premises would have carried out, in order to maintain the premises so that they could be expected to last for their normal life. ...

...

[56] In my opinion, however, the provisions of clause FOURTH did not require the defenders to restore the premises to an "as new" condition at the end of the lease, by, for example, stripping out parts of the premises, such as roofs, windows, lifts, boilers and electrical equipment, which were perfectly serviceable and had periods of useful life left, merely to ensure that those component parts (once replaced) had, as at the expiry of the lease, the same individual life expectancies as their predecessor parts had enjoyed at the commencement of the lease."

Since he was hearing the matter at a preliminary proof dealing with the scope of the obligation in principle, Lord Mackay did not decide what repairs ought to have been carried out by the tenants and in respect of which, therefore, they were liable to the pusuers. In my opinion, his decision as to the scope of the tenants' obligations in a clause where there is an express obligation to renew as well as to repair may provide some useful guidance in the present case as to the limit of the tenants' obligations here.

[25] The second case is Westbury Estates Ltd. v The Royal Bank of Scotland Plc. 2006 SLT 1143. In that case the landlords brought an action against the tenant for the cost of repairs which they claimed ought to have been carried out by the tenants under the repairing covenant in the lease. The lease was for a period of 25 years. The repairing covenant required the tenants at all times to "uphold, maintain, repair and renew the Let Subjects both externally and internally so as to keep the Let Subjects in good and substantial repair and condition, it being declared that the Tenants' obligations shall extend to all work necessary upon the Let Subjects whether structural or otherwise and whether of the nature of maintenance, repair, renewal or rebuilding and whether normally the obligation of a Landlord or of a Tenant, the Landlords having no duties, liabilities or obligations in respect of such work or the cost thereof and further that the Tenants' obligations shall extend to the maintenance, repair, renewal and if necessary replacement of all services within and external to but serving the Let Subjects (either alone or in common with other subjects) including lifts, heating installations, ventilation or air conditioning systems, drainage system and gas, electricity and water supplies and any other services." In his Opinion, at para.[18], Lord Reed made this observation:

"Scots law is not as the law of the Medes and Persians, which altereth not: it has to reflect changes in social practices, in respect of the drafting of commercial leases as in other respects. It appears to me that the present repairing covenant, extending as it does to "all work necessary... whether structural or otherwise and whether of the nature of... rebuilding and whether normally the obligation of a landlord", is designed to cover what the older Scottish cases would have treated as extraordinary repairs."

What he said thereafter has to be read with this proviso, that he was considering a covenant which placed on the tenants repairing obligations going beyond those in the present case. He rejected an argument by the landlords that the tenants were under an obligation to replace an item when it was at the end of its economic life, even when it was not in need of repair. Having started, as one must, with the wording of the repairing covenant, and noting that the covenant was to keep the subjects in good and substantial repair and condition, he said this:

[34] ... the obligation is concerned with the physical condition of the subjects, including the items in question, and requires that the physical condition of the subjects be maintained to a given standard. In order for the obligation to be triggered, the physical condition of the subjects must therefore fall short of the requisite standard. In relation to items of the kind with which the present case is concerned, in particular, the obligation would be triggered if the item was in a state of disrepair ... or ... was in a defective condition by reason of an inherent defect. I also accept that the obligation might be triggered if an item of plant was unreliable and prone to breakdowns: the standard of "good and substantial repair and condition" can be understood as encompassing, in relation to plant and services, a reasonable degree of reliability.

[35] The pursuers' case however proceeds on a materially different basis. Their averment is that it is "necessary" to replace an item when "the item no longer represents the least expensive method of performing its function". Whether an item of plant "represents the least expensive method of performing its function" appears to me to be an entirely different question from whether its replacement is necessary "so as to keep the subjects in good and substantial repair and condition." The fact that the item is less efficient than a more modern equivalent tells one nothing about whether the item is in "good and substantial repair and condition".

[36] It therefore appears to me that the fact that an item is at the end of its economic life, in the particular sense in which that expression is defined in the pursuers' averments, does not entail that the tenant is necessarily obliged under the repairing covenant to replace it. Equally, the fact that an item is of a given age ... does not ipso facto entail that the subjects are other than in "good and substantial repair and condition", particularly when it is also averred that the items are capable of being operated, and that the pursuers have no knowledge of their reliability or servicing costs.

[37] The difference between an obligation to replace an item whenever it ceases to represent the least expensive method of performing its function, on the one hand, and an obligation to replace it if necessary "so as to keep the Let Subjects in good and substantial repair and condition", on the other hand, cannot be bridged by offering to prove that the CIBSE guidelines "are accepted generally as appropriate standards in the building services industry" and that "tenants and landlords of commercial property rely on advice from the building services industry". I do not doubt that it is often helpful, in applying a repairing covenant, to consider whether particular works would be undertaken by a prudent owner; but an affirmative answer to that question cannot bring the works in question within the scope of the covenant if the language of the covenant does not admit them. The intention of the parties to the lease has to be determined from the language which they have used. There is, in particular, a danger of confusing the question whether it would be economic for a prudent building owner to replace an item of plant with the question whether the plant is in such a state that the subjects cannot be said to be in good and substantial repair and condition. Equally, there is a danger of confusing the question whether an incoming tenant would regard the item as old fashioned or underspecified or liable to cause problems at some point in the future, with the question whether the subjects are, as matters stand, in good and substantial repair and condition. ... Even if it were proved, for example, that commercial landlords would normally replace a boiler which was 15 years old (and that incoming tenants would normally expect such a boiler to have been replaced), that would not entail that subjects with a 15 year old boiler, which remained in perfect working order and continued to perform satisfactorily, were not in "good and substantial repair and condition".

[26] Both judgments place limits on the obligations of a tenant under a repairing covenant even when those obligations go further than they would at common law and include an obligation to renew. I have already noted that the repairing covenant in the present case does not go beyond the common law position, but in so as other provisions of the lease may place upon the tenants some obligations of renewal, it is important to note these limits.

[27] As indicated in para.[22] above, I shall repel the pursuers' third plea in law, a plea to the relevancy of the defences, and put the case out By Order for discussion as to further procedure.