L Batley Pet Products Ltd v North Lanarkshire Council
| Jurisdiction | Scotland |
| Judge | Lord Kerr,Lady Hale,Lord Hodge,Lord Reed,Lord Carnwath |
| Judgment Date | 08 May 2014 |
| Neutral Citation | [2014] UKSC 27 |
| Date | 2014 |
| Docket Number | No 10 |
| Court | Supreme Court (Scotland) |
[2014] UKSC 27
Lady Hale, Deputy President
Lord Kerr
Lord Reed
Lord Carnwath
Lord Hodge
Appellant
Roy Martin QC David J T Logan
(Instructed by Balfour & Manson)
Respondent
Mark Lindsay QC John MacGregor
(Instructed by Ledingham Chalmers)
Heard on 17 March 2014
Lord Hodge (with whom Lady Hale, Lord Kerr, Lord Reed and Lord Carnwath agree)
This appeal raises two issues of contractual construction in documents relating to the letting of commercial premises at 1 and 3 South Wardpark Place, Wardpark South Industrial Estate, Cumbernauld, Scotland. The appellant ("Batley") is the mid-landlord of sub-let premises and the respondent ("the Council") is the sub-tenant. Batley and the Council disagree on whether the Council was obliged to remove its alterations and reinstate the sub-let premises on the expiry of the sub-lease when the request to do so was made orally by Batley's surveyor and not put in writing in a schedule of dilapidations or otherwise before the sub-lease expired. The two issues are:
As the repairing obligation in the head lease is in terms which are commonly used in commercial leases, the appeal from the decision of the Extra Division of the Inner House of the Court of Session raises an issue of law of general importance.
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(a) whether under a minute of agreement that authorised alterations to the sub-let premises Batley was obliged to give written notification that it required the Council to remove the alterations and reinstate the sublet premises; and
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(b) whether under the repairing obligation in the head lease, which was applied to the sub-lease, Batley had to give a written notification that it required the Council to carry out the repairs before the expiry of the sub-lease.
The head lease, which is dated 18 and 25 October 1995, granted the tenant a lease of the premises for 25 years until 8 October 2020. Batley acquired the tenant's interest in the head lease in 2007. Clause 3 of the head lease imposed obligations on the tenant, including obligations to repair, maintain and renew the premises (cl 3.12), to maintain the landscaped areas (cl 3.13) and to decorate the exterior and interior of the premises (cls 3.14 & 3.15). As the first of those obligations is in issue, I set out the relevant parts of cl 3.12:
"At all times throughout the Period of this Lease at the Tenant's expense well and substantially to repair, maintain and where necessary to renew, rebuild and reinstate and generally in all respects keep in good and tenantable condition the Premises … and every part thereof with all necessary maintenance, cleansing and rebuilding and renewal works and amendments whatsoever regardless of the age or state of dilapidation of the buildings for the time being comprised in the Premises and irrespective of the cause or extent of the damage necessitating such repair, maintenance, renewal, rebuilding or others and including any which may be rendered necessary by any latent or inherent defects in the Premises …"
The tenant also had to permit the landlord to inspect the premises (cl 3.18) and was obliged to comply with any notices in writing by the landlord identifying a failure to comply with its obligations to repair (cl 3.19).
The tenant had to obtain the landlord's prior written consent to alterations to the premises (cl 3.25(a) & (b)). Although various clauses of the lease generally required written notices, written consents and written approvals, clause 5.8 stated "Any notice, request, demand or consent shall be in writing" and specified what amounted to sufficient service.
The sub-lease to the Council of part of the premises was dated 26 February and 19 March 1998. Its date of expiry was 19 February 2008 but Batley and the Council varied the sub-lease to extend it to 18 February 2009. Clause 5 of the sub-lease provided:
"The Sub-tenant also undertakes with the Mid-Landlord and binds and obliges its successors and assignees whomsoever throughout the Period of the Sub-Lease as follows:-
5.1 Fulfilment of Mid-Landlord's obligations
Save in so far as inconsistent with the express terms of the Sub-Lease to fulfil, perform and observe to the relief of the Mid-Landlord the obligations and restrictions of a non-monetary nature undertaken by or imposed upon the Mid-Landlord under the Lease so far as they relate to the Premises and as if references in the Lease to "the Premises" were references to the Premises as defined in the Sub-Lease and that in accordance with the terms of the Lease.
…
5.3 Expenses
to reimburse to the Mid-Landlord all proper and reasonable costs and expenses incurred by the Mid-Landlord:-
5.3.1 incidental to the preparation and service of all notices and schedules relating to deficiencies in repair or requiring the Sub-Tenant to remedy the breach of any of its obligations under the Sub-Lease whether the same be served before or after the Date of Expiry;
5.3.2 in the preparation and service of a schedule of dilapidations at any time before or after the Date of Expiry;
5.3.3 in procuring the remedy of any breach of any obligation on the part of the Sub-Tenant under the Sub-Lease."
Clause 5.7 of the sub-lease provided that alterations of the sub-let subjects required the prior written consent of the mid-Landlord. Clause 8 contained an irritancy (forfeiture) clause in the event of any breach of any of the undertakings of the sub-tenant under the sub-lease. Clause 13, on which the Council founds, provided:
"The provisions for notices contained in Clause 5.8 of the Lease shall apply also under the Sub-Lease as if "the Mid-Landlord" had been substituted for "the Landlord" and "the Sub-tenant" had been substituted for "the Tenant".
Thus, under the sub-lease any "notice, request, demand or consent" had to be in writing.
The third agreement is the Minute of Agreement dated 7 and 17 April 1998 by which the then mid-landlord licensed the Council to make alterations to the sublet premises subject to conditions. Clause 2 of the Minute of Agreement imposed obligations on the sub-tenant to obtain the needed planning and other permissions (cl 2.1), to notify the mid-landlord of the commencement and completion of the works (cl 2.2), to indemnify the mid-landlord (cl 2.3) and to permit the mid-landlord and its surveyors to inspect the progress of the works (cl 2.4). The obligation at the heart of the present dispute is clause 2.5 which provided:
"By the expiration and sooner determination of the period of the Sub-Lease (or as soon as the licence hereby granted shall become void) if so required by the Mid-Landlord and at the cost of the Sub-tenant to dismantle and remove the Works and to reinstate and make good the Premises and to restore it to its appearance at the date of entry under the Sub-Lease, such reinstatement to be carried out in the same terms ( mutatis mutandis) as are stipulated in this Licence with respect to the carrying out of the Works in the first place (including as to consents, the manner of carrying out works, reinstatement, inspection, indemnity, costs and otherwise)."
Counsel agreed that the word "and" (which I have underlined) should be read as "or".
The issue between the parties on that clause is whether the mid-landlord had to put in writing before the expiration of the sub-lease its requirement for the sub-tenant to dismantle and remove the alterations and to reinstate the premises. This is because clause 5 of the Minute of Agreement stated:
"Obligations of Tenant incorporated into Lease
That during the execution of the Works and when the same shall have been completed all the undertakings and obligations on the part of the Sub-Tenant herein contained shall be deemed to be incorporated in the Sub-Lease and the power of irritancy contained in the Sub-Lease shall be construed and have effect accordingly."
Finally, clause 7 provided that "[e]xcept in so far as amended hereby" the parties ratified and confirmed the whole terms of the sub-lease.
Counsel did not know whether and on what terms the head landlord had consented to the sub-tenant's alterations.
Batley presented its claim on alternative bases:
The Council challenged the legal relevancy of Batley's case. Temporary Judge Wise QC concluded that Batley had pleaded a relevant case because she construed clause 2.5 of the Minute of Agreement as allowing Batley to communicate orally that it required the reinstatement of the sub-let premises. She allowed the parties a proof before answer of their averments. Per incuriam in her interlocutor of 20 December 2011 she repelled the Council's plea to the relevancy (plea in law 1).
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(a) Under the Minute of Agreement it claimed £253,766.44 for both the removal of the alterations and the repair of the sub-let premises; and in the alternative
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(b) under clause 5 of the sublease, which imposed on the Council the obligations of clause 3.12 of the lease, it claimed £189,692.30...
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