@sipp (pension Trustees) Limited V Insight Travel Services Limited
| Jurisdiction | Scotland |
| Judge | Lady Smith,Lady Clark Of Calton,Lord Menzies |
| Judgment Date | 11 December 2015 |
| Neutral Citation | [2015] CSIH 91 |
| Court | Court of Session |
| Date | 11 December 2015 |
| Published date | 11 December 2015 |
| Docket Number | CA148/12 |
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2015] CSIH 91
CA148/12
Lord Menzies
Lady Smith
Lady Clark of Calton
OPINION OF THE COURT
delivered by LADY SMITH
in the reclaiming motion
by
@SIPP PENSION TRUSTEES
Pursuers and reclaimers;
against
INSIGHT TRAVEL SERVICES LIMITED
Defenders and respondents:
Act: Ellis QC, J Brown; Morisons LLP
Alt: Sandison QC; Brodies LLP
11 December 2015
Introduction
[1] The reclaimers were landlords and the respondents were tenants in a lease of commercial premises which came to an end on 31 May 2012. The dispute which gives rise to the current litigation relates to the nature and extent of the tenants’ obligations under the lease in relation to repair, maintenance and renewal during its subsistence and at expiry. The premises are Gareloch House, an office block on an industrial estate in Port Glasgow, together with its car parking area and common parts. They had, to a greater or lesser extent, been tenanted by the defenders since the 1980’s. The reclaimers acquired the premises in 2007 and thereby also acquired the landlord’s interest in a lease dated 22 June and 18 July 2005.
The lease
[2] The tenants’ obligations are specified in Part III of the Schedule to the lease and include:
“(Three)
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To accept the leased subjects in their present condition and at their own cost and expense to repair and keep in good and substantial repair and maintained, paved, heated, aired and cleansed in every respect all to the satisfaction of the Landlord and to replace or renew or rebuild whenever necessary the leased subjects and all additions thereto and all drains, soil and other pipes, sewers , sanitary and water apparatus, glass, pavings, access roads, (other than public roads serving the leased Subjects) parking areas, walls, fences, railings, vaults, pavement lights, landscaped areas and parts, pertinents and others therein or thereon in at least as good condition as they are accepted by the Tenant all to the satisfaction of the Landlord and that regardless of the age or state of the dilapidation of the buildings or others for the time being comprised in the leased subjects: ……
- Without prejudice to the foregoing provisions of this Clause, to keep all lighting, heating, ventilation, security and drainage systems, all water supply, gas and other installations, all fire fighting equipment and all other machinery in or serving the leased subjects (including, without prejudice to the foregoing generality, electric wiring, gas and oil and other necessary pipes) in good working order, repair or condition to the satisfaction of the Landlord and, from time to time, when requisite or when reasonably required by the Landlord, to replace the same or any of them by suitable articles or equipment of similar and modern kind, all to the satisfaction of the Landlord.
……….
……….
(Seven) At the expiry or earlier termination of the foregoing Lease and subject to the Tenant carrying out, to the satisfaction of the Landlord, all restoration works called for by the Landlord in terms of Clause (Twelve) of this part of this Schedule quietly and without any warning away or other process of law notwithstanding any law or practice to the contrary to surrender to the Landlord the leased subjects together with all additions and improvements made thereto and all fixtures (other than trade or tenant’s fixtures affixed by the Tenant or any sub- tenant which shall be removed by the Tenant) in or upon the leased subjects or which during the foregoing lease may have been affixed or fastened to or upon the same that in such state and condition as shall in all respects be consistent with a full and due performance by the Tenant of the obligations herein contained. Without prejudice to the foregoing generality at his own cost and expense to repair and make good to the satisfaction of the Landlord all damage including damage to paint work caused by the removal of trade or tenant’s fixtures affixed to the leased subjects by the tenant or any sub-tenant; Provided Always that if the Landlord shall so desire at the expiry or sooner termination of the foregoing Lease they may call upon the Tenant, by notice in writing (in which event the Tenant shall be bound), to pay to the Landlord at the determination date (with interest thereon as provided in Clause One (b) hereof), a sum equal to the amount required to put the leased subjects into good and substantial repair and in good decorative condition in accordance with the obligations and conditions on the part of the Tenant herein contained in lieu of requiring the Tenant himself to carry out the work.”
Clause (Twelve) provides that the tenant may not make alterations or additions to the premises or erect new buildings, fences or walls without the consent of the landlord and it binds the tenant, at the expiry of the lease, to reinstate and restore the premises to the condition they were in prior to the carrying out of any such works.
[3] The lease did not have attached to it any schedule or other record – such as photographs - of the condition of the premises at its commencement.
The issues
[4] In answer 11, the respondents aver that they are not liable for:
“..what would be material improvements to the state of the Premises over and above their state at the date of entry under the Lease, beyond the repairing obligations thereof.”
Following debate, the Lord Ordinary concluded that an obligation to keep premises in good and substantial repair did not necessarily import an obligation to put them into that condition and then construed clause 3(a) (above) as meaning that:
“…the pursuer’s claim, in so far as based upon an obligation at termination to put the premises into a condition better than they were in at commencement is not relevantly stated.” (para 23)
By way of consequential amendment, the Lord Ordinary deleted the words “put and” from a sentence in article 10 of Condescendence which, prior to that amendment, read:
“The Defenders were obliged to effect all repairs, maintenance and renewal necessary to put and keep the Premises in good and substantial repair and maintained in at least as good a condition as they were accepted by them.”
In this reclaiming motion, the first issue is, accordingly, whether the Lord Ordinary erred in his construction of the tenant’s obligations under clause 3.
[5] In answer 13, in response to the reclaimers’ averments explaining that the sum sued for (£746,903.99 plus VAT) is the cost of putting the premises into good and substantial repair in accordance with the tenant’s obligations under the lease, the respondents aver:
“ …the sum sued for greatly exceeds such sum as may properly be due. If defenders had carried out the works they accept ought to have been carried out before Lease expiry, the capital value of the Premises as at the date the Lease terminated would have increased by £75,000. Esto the defenders should have carried out all the works listed in the Schedule of Dilapidations amounting to £1,261,303.50 by Lease expiry (which is denied), the capital value of the Premises as at the date the Lease terminated would only have increased by £175,000. The pursuers are presently marketing the Premises for sale. No reasonable landlord would carry out, and it is believed and averred that the pursuers do not intend to carry out, the works to the Premises, as to do so would not bring about an increase in the capital value of the Premises, and thus the price obtained when the Premises are sold, commensurate with the cost of the works. The true value of the pursuer’s loss in the circumstances condescended upon should be measured by the diminution in the capital value of the Premises, and thus the reduction in the price they are likely to achieve upon a sale, which is materially less than the cost of carrying out the works the defenders accept ought to have been carried out.”
The relevance of those averments was also an issue in the debate before the Lord Ordinary. He construed the proviso to clause 7 as being an obligation to make payment for the cost of the works that was:
“conditional upon the pursuer intending to carry out the repair works, and not as a liquidate damages provision” (para 28).
That being so, he added:
“ It follows that the proviso to clause (seven) does not, in my opinion, preclude the defender from offering to prove that the appropriate measure of the pursuer’s loss is something other than the cost of repair. I leave open the question whether it would be sufficient, in order for the pursuer to succeed, to prove an intention to carry out the works required to put the subjects in the specified condition regardless of the extent to which the cost would exceed the resultant increase in the capital value of the subjects, as this issue did not fall within the scope of the debate.” (para 29)
[6] The second issue is, accordingly, whether the Lord Ordinary erred in construction of clause 7. According to what we were told by senior counsel for the respondents in the course of the hearing, it is this issue that gives rise to, potentially, the most substantial difference between parties’ respective quantifications of the reclaimers’ claim.
First issue: the tenant’s obligations under clause 3(a)
The Lord Ordinary’s opinion
[7] In concluding as he did, the Lord Ordinary was critical of the grammar of the clause and critical of its draughtsmanship. He said that it was not – on a forensic analysis of the language ‑ possible to identify a construction which gave a meaning to every word and that allowed him to give “less priority” to the order in which the words appeared. He held that the words “in at least as good condition as they are accepted by the Tenant” were the key element of the clause and applied to all aspects of the tenant’s obligations. He concluded that that excluded any obligation to leave the premises in a state of improvement from their condition at the commencement of the lease....
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