Dolby Medical Home Respiratory Care Ltd Against Mortara Dolby Uk
| Jurisdiction | Scotland |
| Judge | Lord Woolman |
| Neutral Citation | [2016] CSOH 74 |
| Court | Court of Session |
| Docket Number | CA17/15 |
| Published date | 27 May 2016 |
| Date | 27 May 2016 |
| Year | 2016 |
OUTER HOUSE, COURT OF SESSION
[2016] CSOH 74
CA17/15
OPINION OF LORD WOOLMAN
In the cause
DOLBY MEDICAL HOME RESPIRATORY CARE LTD
Pursuer;
against
MORTARA DOLBY UK
Defender:
Pursuer: Thomson; Burness Paull LLP
Defender: Paterson; Morton Fraser LLP
27 May 2016
Introduction
[1] Arthur Dolby formerly owned Monitor House, Kerse Road, Stirling (“the subjects”). In 1978 he incorporated a company called R L Dolby & Co Ltd (“RLD”). Its business comprised three divisions: (i) home oxygen services; (ii) sales and service; and (iii) dental decontamination. All of them operated from the subjects.
[2] In 2007 Mr Dolby granted a 10 year lease of the subjects to RLD (“the lease”). Around the same time, he took steps to divest himself of his interests in RLD. He assigned the lease to two individuals (“the landlords”). He sold the entire shareholding to three individuals (“the investors”).
[3] RLD changed its name twice. In 2008 it became Dolby Medical Ltd. In 2010 it became Dolby Medical Home Respiratory Care Ltd (“DML”). The same year the investors restructured the business. They formed a new company, Mortara Dolby UK Limited (“Mortara”). It took over the ownership of the sales and service and dental decontamination division. DML retained ownership of the home oxygen services division. It also continued as the tenant under the lease.
[4] DML altered the subjects so that all three divisions could continue in occupation as before. It granted a licence to Mortara to occupy the larger part (“the premises”), as it had done for many years. The licence contains several clauses that set out Mortara’s obligations in respect of repairs to the premises and the common parts.
[5] In terms of the lease the tenant could serve notice to terminate half way through its term. DML exercised the break provision. In consequence both the lease and the licence came to an end on 12 December 2012.
[6] On receipt of the notice of termination, the landlords served a schedule of dilapidations on DML (“the schedule”). It showed a total figure of £641,171.37 for carrying out the repair works.
[7] DML accepted that it was in breach of its repairing obligations under the lease. It contested, however, the extent and cost of repairs.
[8] There followed a familiar dance: the landlords raised an action to recover the repair costs, DML lodged defences and the court fixed dates for a proof. The proof diet did not, however, proceed because the parties reached an extrajudicial settlement. DML paid £275,000 to the landlords to satisfy the claim. It was a global settlement with no apportionment to individual elements in the schedule.
[9] In compromising the action, DML acted on the advice of its solicitors and surveyors. It invited Mortara to participate in the settlement negotiations and to contribute toward the cost of repairs to the common parts. Mortara declined the invitation. It has consistently maintained that it has no liability to pay a share of those costs. That is the principal issue for decision. It turns on the proper construction of the licence.
The Licence
[10] The licence refers to the subjects as the whole of Monitor House let to DML under the lease. It distinguishes them from the premises, which is that part of the subjects occupied by Mortara for the operation of its business “extending to no more than 75% of the floor area”.
[11] Several clauses have a bearing upon liability for repairs. I summarise them as follows:
8. Mortara had to pay 75 per cent of “the cost of maintaining and repairing the common parts” of the subjects.
10.1 Mortara accepted the premises including the common parts “as being in a good tenantable condition and a thorough state of repair and decoration”. It bound itself “to maintain same in the like condition and state of repair during the currency of this Licence”.
10.2 “The Licensee shall not be entitled to remove any of the works, fixtures, fittings or others carried out or installed by the Licensor or Licensee.”
14. Mortara agreed to pay a proportion of the cost of any works to the common parts that were required by statute or local regulation.
15. Mortara would indemnify DML in respect of all liability “properly and reasonably incurred” as a result of any breach of the licence by Mortara.
17. At the termination of the licence, Mortara had to leave the premises “in a good state of repair and in a neat and tidy condition”. DML could require Mortara to restore the premises “to the condition in which they were at the date of entry” free of expense to DML.
18. “Except insofar as inconsistent with the other provisions” of the licence, Mortara had to “observe, comply with and perform the whole obligations” imposed upon DML under the lease “so far as they relate to the Premises” and indemnify DML “on a full indemnity basis, against any failure or omission so to do.”
Submissions
[12] Mr Paterson contended that Mortara’s obligations under the licence only applied during its currency, not at termination. As it had maintained the premises while in occupation, it had discharged its duties. Any breach of the repairing obligations under the lease was the responsibility of DML. It could not relay any part of that liability to Mortara.
[13] Mr Thomson tacked in the opposite direction. He argued that in determining whether Mortara had discharged its obligations under the licence, the parties had framed a simple test. Were the premises in a good tenantable condition and a thorough state of repair? That question was as pertinent at the end of the lease as during its currency.
Liability
[14] The starting point is clause 8. Its language is unqualified. Its meaning is clear. In my view it clearly contemplates that Mortara has a dilapidations’ liability. If the parties had intended to draw a distinction between currency and termination, I would have expected that to be clearly expressed. I therefore hold that Mortara’s share amounted to 75 per cent of the cost of maintaining and repairing the common parts.
[15] Although the licence does not define the term “common parts”, it is generally understood to refer to areas from which both parties derive benefit, such as the roof: Marfield Properties v Secretary of State for the Environment 1996 SC 362. Any dispute about what constitutes a common part ought in my view properly to be the subject of evidence....
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