 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
Scottish Court of Session Decisions |
||
|
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> West Castle Properties v. Scottish Ministers [2004] ScotCS 104 (28 April 2004) URL: http://www.bailii.org/scot/cases/ScotCS/2004/104.html Cite as: [2004] ScotCS 104, 2004 SCLR 899 |
||
[New search] [Help]
|
OUTER HOUSE, COURT OF SESSION |
|
|
|
OPINION OF LORD MACKAY OF DRUMADOON in the cause WEST CASTLE PROPERTIES LIMITED, a company incorporated under the Companies Acts (Registered No. SC147942) having a place of business at 61 North Castle Street, Edinburgh EH2 3LJ Pursuers; against THE SCOTTISH MINISTERS, Office of the Solicitors to the Scottish Executive, Victoria Quay, Leith, Edinburgh Defenders:
________________ |
Pursuers: Dean of Faculty (C M Campbell, QC), Webster; Shepherd & Wedderburn, W.S.
Defenders: Cullen, QC, Sheldon; R M Henderson, Solicitor to the Scottish Executive
28 April 2004
[1] The pursuers are the proprietors of the interests of the landlords under a Lease entered into between BSC Pension Fund Trustee Limited and the Secretary of State for the Environment on 27 October 1980 and 10 November 1982 ('the Lease'). The defenders, as the statutory successors to the Secretary of State for the Environment, in respect of his interests under the Lease, became the tenants under the Lease. The subjects of the Lease were premises known as St Margaret's House, London Road, Edinburgh ('the premises'). The period of the Lease was from 24 October 1977 until 28 November 2002. The premises were constructed shortly before the original tenant took entry in terms the Lease. The defenders and their statutory predecessor have been the only tenants of the premises. [2] The Lease contains the following clauses:|
"FOURTH |
The Tenant HEREBY ACCEPTS by his execution hereof, the premises and the whole parts and pertinents thereof including without prejudice to that generality the whole electrical and heating systems and lifts, the roofs, floors, walls, drains, rhones, drain-pipes, water, gas, electric and all other supply pipes, waste pipes, windows, window glass, car parking area and car park spaces and surrounding ground, and the whole Landlords fittings and fixtures both internal and external as in good and tenantable condition and repair and BINDS HIMSELF at his sole expense during the currency of this Lease, to keep wind and water tight, and well and substantially to repair, maintain, renew, restore, cleanse and keep in the like good tenantable condition and repair the whole premises and the said parts and pertinents thereof and the said fittings and fixtures (including without prejudice to that generality, all unbuilt on and amenity areas); AND FURTHER the Tenant HEREBY UNDERTAKES that he will jointly (and that according to the respective rateable values) with the proprietors or tenants of the adjoining subjects lying to the East, uphold, maintain, repair and renew the access road shown hatched in blue on the Plan (which Plan forms the Second Schedule hereto) and the lighting thereof, drains, sewers, main gas, water electricity and other service cables and pipes and all others common to or used in common by the Tenant and the said other proprietors or tenants and in the event of the Landlords instructing any of such repairs or others, to free and relieve the Landlords of the share of any expense incurred by them in so doing attributable to the premises, DECLARING HOWEVER (Primo) that it is specifically agreed that the Landlords shall at their own expense replace, repair and make good or re-instate all damage, defects, omissions and want or repair which shall be due to faulty workmanship or the use of faulty materials in the construction and decoration of the building (specifically excluding any works or any description carried out by the Tenant, but including any partitioning or electrical or other works of fitting out the premises carried out by the Landlords on behalf of and on the instructions of the Tenant) as may appear during the period of twelve months occurring after the said date of entry, and (Secundo) in the event of any obligation binding on the Tenant under or by virtue of this Clause remaining unimplemented at the expiry or earlier termination of this Lease the Tenant shall, in the option of the Landlords, either implement such obligation or pay to the Landlords a sum equal to the cost of implementing the same; Provided always that this clause shall not apply if the implementation of such obligation would be unnecessary for the purposes of reletting the premises at the full rent which would have been obtainable if said obligation has been implemented. |
|
FIFTH
SEVENTH |
Without prejudice to any of the foregoing generalities the Tenant hereby UNDERTAKES in every fourth year and in the last three months of said term to paint ....(the premises).... DECLARING HOWEVER that for as long as the premises remain in the occupation of the Crown the provisions of this Clause in so far as they impose upon the Tenant an obligation to paint every fourth year and in the last year of this Lease, shall not apply, but the Tenant shall be bound to keep all said internal and external parts of the premises in good condition and in good decorative order to the reasonable satisfaction of the Landlords throughout the term of this Lease and in the last year of this Lease (however determined) shall be bound to paint the same in the manner above described. .... The Tenant shall keep the premises including the mechanical and electrical engineering services constantly insured against fire, explosion, storm, lightning, tempest, flood, thunderbolt, riot, civil commotion, labour disturbances, aircraft, or objects falling therefrom, malicious damage, bursting or overflowing or (sic) waterpipes, tanks or apparatus, earthquake, impact or inevitable accident and all other risks as shall from time to time be reasonably required by the Landlords at their full reinstatement value together with professional fees thereon (in accordance with the respective professional scales of charges in force from time to time) and for three years rent abortively incurred with an established Insurance Office in the name of the Landlords and shall do no act or permit any default whereby such insurance may be void or voidable and in the event of the destruction or partial destruction of or damage to the said premises including the mechanical and electrical engineering services the tenant shall, in supplement to his obligations under Clause Fourth hereof, rebuild, renew, reinstate and repair the said premises and the mechanical and electrical engineering services so far as destroyed and make good the damage thereby occasioned as soon as may be reasonably practical at his own expense and any deficiency between the cost of such repairing and making good and the sum recovered from the Insurance Office shall be met by the tenant and the rent payable hereunder shall continue to be so payable provided that whilst the Tenant is a Government Department or Agency the requirement to insure as set out in this Clause (but not the obligation to reinstate or the continuance of rent) shall be inoperative it being declared that this Lease shall continue in full force and effect notwithstanding damage to or destruction of the premises. .... |
|
NINETEENTH Removal of goods at end of Lease |
The Tenant shall at the expiry or earlier termination of this Lease flit and remove himself, his sub-tenants and any other person deriving occupation from him and his and their goods, gear and effects furth of and from the premises without warning or process of law to that effect and shall be responsible for the cost of making good all damage to the premises consequent upon the removal and also (subject to the terms of Clause FOURTH hereof) for surrendering up the premises in a good and substantial repair and condition, and for restoring the premises to the condition they were in at the commencement of the Lease before any permitted additions, improvements or alterations were made thereto (if any) if required so to do by the Landlords and all at his own expense." |
"Under explanation that there is no obligation to alter the nature or character of the premises as leased in 1977, the defenders are obliged to keep and leave the premises in such condition that, if being re-let on the same terms as the 1977 lease (subject to an up-to-date full rental for premises of this character, locality and age as at the date of assessment of the rent), they are reasonably fit for the requirements of a reasonably-minded tenant taking under the hypothesised new lease".
The pursuers' formulation is, of course, subject to the qualification that the hypothetical reasonably-minded tenant would pay an up-to-date rent, determined in light of the character, locality and age of the premises, as at the date the rent fell to be assessed.
[12] The written formulation submitted by senior counsel for defenders was in the following terms:-" 'Good tenantable condition and repair' means such condition that the premises could be let, on terms appropriate in view of the age, character and quality of the premises, to a reasonably-minded commercial tenant on the assumption that all of the needful and necessary repairs had been carried out by the time of the expiry of the lease."
I will return to the detail of those written formulations in due course.
[13] Before I turn to deal with the questions that the parties have posed, it is important to stress that I am being invited to answer those questions without my having heard any evidence. Under reference to certain of the productions in the case, I was given some indication as to the areas of dispute between the parties, in particular as to (i) the nature of the alleged defects in the premises, as at 28 November 2002, the date by which the defenders vacated the premises, and (ii) the extent to which the defenders are alleged to have been in breach of their obligations under the Lease, as at that date. Those productions contain, in summary form, the parties' respective contentions about the alleged defects in the premises, how the alleged defects might be remedied and the costs that would be involved in doing so. Certain of the entries to which I was referred, by way of example, relate to disputes as to whether, as at 28 November 2002, (i) areas of asphalt roof required to be removed and replaced, (ii) the lift installation require to be completely refurbished and (iii) the low temperature hot water heating system required to be replaced. In each instance, the pursuers contend that extensive works, involving replacement, were required, as at 28 November 2002, whilst the defenders contend that no such works were necessary. [14] I have not, however, heard any evidence about the nature, extent and causes of the alleged defects or as to whether they arise by reason of any breach by the defenders of their obligations under the Lease. Nor do I have before me a report from an independent arbiter or reporter, as to the facts of the disputes between the parties. In those respects, I am in a different position from many of the judges to whose Judgments and Opinions I was referred, during the course of the submissions by counsel. Furthermore, I am not being asked to sustain or to repel any pleas-in-law at this stage in the action. [15] The questions before me have been posed by the parties in the hope that my answers to those questions may assist the parties to negotiate an overall settlement of the dispute between them. From time to time, that is a procedure that is adopted in commercial causes. It is a procedure which, on occasion, assists in bringing about settlement. On other occasions, however, the procedure is less productive, not least of all because, in advance of a hearing taking place, it may be difficult to frame the most relevant questions for the Court to answer. [16] During the course of the submissions I was referred to a number of authorities, which included:- Proudfoot v Hart [1890] 25 QBD 42, Davidson v Logan 1908 SC 350, In re Corporation of London v Great Western and Metropolitan Railways [1910] 2 Ch. 315, Lurcott v Wakely & Wheeler [1911] 1 KB 905, Anstruther-Gough-Calthorpe v McOscar [1924] KB 716, House of Fraser Plc v Prudential Assurance Co Ltd 1992 SCLR 883 and 1993 SCLR 793, Crédit Suisse v Beegas Nominees Limited [1994] 4 All E R 803, Taylor Woodrow Property Company Limited v Strathclyde Regional Council, Outer House, Lord Penrose, 15 December 1995, Unreported, Helen Lowe v Quayle Munro Limited 1997 SC 346, McCall's Entertainments (Ayr) Limited v South Ayrshire Council (No 2) 1998 SLT 1421 and Scottish Mutual Assurance Plc v Jardine Public Relations Limited [1999] ECGS 43. Both parties also referred to various paragraphs from Dilapidations: The Modern Law and Practice (Second Edition) Dowding and Reynolds, in particular Paras. 9-06, 9-07, 9-08, 9-11, 9-12, 9-15 and 9-28. [17] Having regard to the terms of Clauses FOURTH and the agreed history of events, as set out in the written pleadings and the Joint Minute, it appears that the points of particular assistance, in the construction of Clause FOURTH, which fall to be drawn from those authorities, include:(i) the need to give full effect to every word in a covenant such as Clause FOURTH;
(ii) that the scope of the term "repair", in such a covenant, is not normally synonymous with that of a term such as "keep in good and tenantable condition and repair";
"... and well and substantially to repair, maintain, renew, restore, cleanse and keep in the like good tenantable condition and repair the whole premises and the said parts and pertinents thereof and the said fittings and fixtures, (including without prejudice to that generality, all unbuilt on and amenity areas)."
".... but the age of the house is very material with respect to the obligation both to keep and to leave it in tenentable repair. It is obvious that the obligation is very different when the house is fifty years older than it was when the tenancy began. Lopes L.J. has drawn up a definition of the term 'tenantable repair' with which I entirely agree. It is this: '"Good tenantable repair" is such repair as, having regard to the age, character, and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it." The age of the house must be taken into account because nobody could reasonably expect that a house 200 years old should be in the same condition of repair as a house lately built; the character of the house must be taken into account, because the same class of repairs as would be necessary to a palace would be wholly unnecessary to a cottage; and the locality of the house must be taken into account, because the state of repair necessary for a house in Grosvenor Square would be wholly different from the state of repair necessary for a house in Spitalfields. The house need not be put into the same condition as when the tenant took it; it need not be put into perfect repair; it need only be put into such a state of repair as renders it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it."
It is of importance to note the terms in which the last sentence of that passage is couched.
[32] The facts of Anstruther-Gough-Calthorpe v McOscar were slightly more complicated. A lease of three newly erected houses, made in 1825 for a term of 95 years, contained a covenant by the lessee in very wide terms, the effect of which was, put shortly, that the lessee would, during the term of the lease, well and sufficiently repair the premises with all manner of necessary reparations and would yield the premises up at the end of the term "in all things well and sufficiently repaired". [33] 95 years later, disputes arose between the landlord and the tenants as to the condition of the premises at the end of the lease and as to how the damages payable by the tenants fell to be assessed. At the beginning of the term, the houses had been country houses. At the end of the term, the only tenants likely to have occupied the houses were tenants on short terms. [34] The dispute between the parties went to arbitration. The arbitrator assessed damages at two alternative sums:"(1) The higher sum in my award is my estimate of the cost of doing all needful and necessary acts well and sufficiently to repair, etc., the premises in the words of the covenant, which I took generally to mean the cost of putting the premises -
(2) The lower sum is my estimate of the cost of such repairs as would satisfy the literal requirements of reasonably minded tenants of the class now likely to occupy the premises who would not accept any repairing obligations, with such additions as would be necessary to avoid the receipt of notices from the local authorities......".
"For my own part I should be very reluctant to introduce into convenants in leases considerations of fitness for a particular purpose which cause much difficulty in contracts of a different kind. Unguided I should have thought that the original and proper sense of 'tenantable' was fit to be tenanted, that is, occupied, and that the word meant no more than, if it meant as much as, 'habitable'. But Proudfoot v Hart binds me to hold that in a three years' agreement it has reference to the reasonable requirements of a tenant of the class who would be likely to take it. Accepting that construction I have no doubt that the requirements of such a tenant are deemed to continue the same during the term, or if not, are to be estimated by the requirements of such a tenant as would be likely to take the premises at the commencement of the term.
Once one is extricated from the clutch of the hypothetical tenant I do not think there is much difficulty in construing the covenant in this case to 'well and sufficiently repair .... maintain .... paint, pave .... amend and keep' the premises 'in by and with all and all manner of needful and necessary reparations and amendments whatsoever, and .... so .... amended and kept .... yield up.' There is a very full discussion of what is meant by 'repair' in the judgments of Fletcher Moulton and Buckley L.J.J. in Lurcott v Wakely (1) with which I respectfully concur. Repair is not confined to houses; it applies to chattels, and it connotes the idea of making good damage so as to leave the subject so far as possible as though it had not been damaged. It involves renewal of subsidiary parts; it does not involve renewal of the whole. Time must be taken into account; an old article is not to be made new; but so far as repair can make good, or protect against the ravages of time and the elements, it must be undertaken. Speaking generally, I have not seen a better statement of the duties of a tenant under such a covenant as this than the statement in the present case by the arbitrator of the principles on which he proceeded in arriving at the high sum, which has been read by my Lord. It is true that he refers to the class of tenant likely to occupy them as being one of the matters a prudent owner would have regard to, but I gather from the whole report that he does not regard this consideration as involving a fluctuating standard. I would myself prefer to eliminate the possible tenant, and would be content with the arbitrator's earlier test when he is dealing with the pointing as being 'needful and necessary for the maintenance of the structure so that it may be expected to last for its normal life if properly kept in repair."
[43] As far as the other Scottish authorities to which I was referred are concerned, it is correct, as Lord Hamilton observed in McCalls Entertainments v South Ayrshire Council (No.20), at p.1427G, that the common law of England is not identical to the common law of Scotland in this field and that English authority should be used with caution. Nevertheless, none of the Scottish authorities placed before me have suggested that the passages in English authorities, which I have found to be of assistance, are not consistent with the law of Scotland.
[44] Having considered the various submissions, I neither accept nor reject in its entirety either of the parties written formulation as to the correct construction of Clause FOURTH. In my opinion, the pursuer's formulation seeks to impose too extensive an obligation on the defenders. On the other hand, the defenders' formulation does not appear to me to encompass all the duties that were incumbent on the tenants throughout the duration of the lease. For my part, I do not consider that it would be sensible for me to attempt to frame a third formulation, not least of all because any such formulation has to some extent, at least, to be drafted in cryptic terms. Against that background, I turn to deal with the questions that are before me.Question 1. What is the proper construction of Clauses FOURTH and NINETEENTH of the Lease?
[45] The parties are agreed that this question is central to the dispute between them. They are also agreed that the provisions of Clause NINETEENTH add nothing to the obligations on the defenders that are to be found within the provisions of Clause FOURTH. Accordingly it is upon the provisions of Clause FOURTH, and in particular on the phrase "keep in the like good tenantable condition and repair", that I should focus. [46] I have already quoted the written formulations submitted by the Dean of Faculty and senior counsel for the defenders as to how that phrase should be construed. As I have indicated, I do not consider that either written formulation provides a fully acceptable analysis of the obligations that Clause FOURTH placed on the defenders. [47] It is, as I have made clear, a matter of agreement between the parties that the premises were in "good tenantable condition and repair" at the outset of the lease. In that respect, the factual position in the present case is different from that in McColls Entertainment v South Ayrshire Council (No.2), where an issue arose as to whether the tenants had been under an obligation to improve the subjects of the lease. Likewise, it is a matter of agreement in the present case that the defenders were under an obligation to keep the premises wind and watertight. [48] Turning to the critical part of Clause FOURTH, namely that the defenders bound themselves, at their sole expense ".... during the currency of this Lease, to keep wind and water tight, and well and substantially to repair, maintain, renew, restore, cleanse and keep in the like good tenantable condition and repair the whole premises and the said parts, pertinents thereof and the said fittings and fixtures....", it is possible to identify a number of other points of agreement. They include that these particular provisions involved the defenders doing something more than merely "repairing" the premises. [49] More importantly, it is also a matter of agreement that neither when maintaining the premises, during the course of the Lease, nor when vacating the premises at the termination of the Lease, were the defenders under an obligation to restore the premises to a physical condition identical to that the premises had been in at the commencement of the Lease or to an equivalent 'as new' condition. Such requirements were explicitly disavowed by both junior counsel for the pursuers and the Dean of Faculty, during the course of their submissions. Those concessions, which both counsel repeatedly stressed, can, in my opinion, be reconciled with their reliance on the Judgment of Eve J. in In re London Corporation v Great Western and Metropolitan Railway. In that case, the covenant on the lessees was in similar terms to those found in Clause FOURTH. That covenant covered iron girders supporting the roof and superstructure of the premises that had been let to the defendants. Some of those girders had become corroded and weakened. They remained in a condition that would have secured the absolute safety of the superstructure. Eve J. held, however, that the lessors were entitled to require the lessees to maintain the demised premises at a standard of strength and stability corresponding with that originally fixed and not merely in such a condition as would secure the absolute safety of the superstructure. Such a ruling is explained by there having been physical defects in the premises, which could be dealt with by repair or replacement of the component parts. [50] Counsel for the pursuers also stressed that they were not contending that the defenders had been under any obligation to alter the nature and quality of the premises. They acknowledged that, throughout the Lease, the pursuers had been required to bear the cost of any avoidable or unavoidable betterment. In my opinion, those further concessions were properly made and define certain of the limits of the obligations that Clause FOURTH placed on the defenders. [51] What then was the full extent of the obligations, which Clause FOURTH placed on the defenders in respect of the premises? In addressing that question, I have to bear in mind that those obligations came into existence at the date of commencement of the Lease. The obligations existed throughout the Lease. The Lease was concluded on the basis that the obligations would subsist throughout the Lease, not vary, nor develop, as the Lease ran its course, let alone crystallise on the expiry of the Lease. In my opinion, the obligations placed on the defenders, in terms of Clause FOURTH, fall to be construed as having required the defenders to carry out a variety of works, as the Lease ran its course. As at the date of commencement of the Lease, the precise nature of all of those works was obviously not foreseeable. What could have been foreseen, however, was that works would require to be carried out, when and insofar as they were necessary to ensure that the premises were maintained in the condition that Clause FOURTH required. In my opinion, very helpful guidance in identifying what that required condition was is to be found in the passages from the Judgments in Proudfoot v Hart and Anstruther-Gough-Calthorpe to which I have already referred. [52] In my opinion, the provisions of Clause FOURTH required the defenders to carry out any 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. In seeking to define the extent of the obligations on the defenders in terms of Clause FOURTH, some regard also requires to be had to the requirements of the class of tenants that would be likely to occupy the premises, with those requirements being determined as at the commencement of the term of the Lease. However, as the Judgments in Anstruther-Gough-Calthorpe ( per Banks L.J at p. 728, Scrutton L.J at p. 729 and Atkin L.J. at p. 734) make clear, those requirements, whatever they may be established to be, should not be looked at in isolation. [53] The Judgments in Anstruther-Gough-Calthorpe support the view that what the provisions of Clause FOURTH required the defenders to carry out were such works of repair, renewal and replacement as fall within the description of "necessary and needful". Works that were "needful and necessary" clearly include those works that were required to keep the premises in the condition they would have been in, had they been maintained by a reasonably-minded owner. On any view they included making good any damage that the premises had suffered and protecting the premises against the ravages of time. [54] In my opinion, however, the provisions of Clause FOURTH required the defenders to carry out works that went beyond the 'repair', strictly so called, of individual parts of the premises. The terms in which Clause Fourth is framed presuppose that a particular part of the premises, or a component part of the premises such as the lift or a boiler, may suffer from some defect, such as deterioration or malfunctioning, to the degree and extent that repair, alteration or renewal has become reasonably necessary. That may be so even although the part in question remains usable for some further period of time. Whether a particular part of the premises, if found to be in such a condition, requires to be repaired, altered or renewed, involves questions of fact and degree, to be determined having regard to the nature and extent of the defect and the costs involved. [55] It is clear from the guidance to be gained from Proudfoot v Hart and subsequent authorities that maintaining the premises 'in good and tenantable condition and repair' did not require the premises to be kept in perfect repair or in as new a condition as they had been in at the commencement of the Lease. Whilst the premises became older, as the Lease ran its course, the passage of time did not alter the nature of the obligations on the tenants. Nevertheless, in fulfilling those obligations, the tenants were entitled to take account of the increasing age of the building. As Lord Esher M.R indicated in Proudfoot v Hart at p. 52, "'the age of the house is very material with respect to the obligation both to keep it and leave it in tenantable repair". Accordingly, in assessing whether or not the defenders had complied with their obligations, as at the expiry of the Lease, allowance can be made for the age of the premises and the age of their various component parts. Standing the fact that I have not heard any evidence about the premises, I cannot say what practical implications Lord Esher's observation may have in respect of the condition of the premises as at the expiry of the Lease. [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. [57] Whether, as the pursuers appear to be contending, the defenders were, as at the expiry of the Lease, under an obligation to relay particular sections of the roof of the premises, or to replace particular lifts and boilers, involves questions of fact and degree, which at this stage of the proceedings I am not being asked to decide. Nor indeed would it be appropriate for me to make any observations as to how particular factual issues of that nature may fall to be resolved. At this stage all I can indicate is that before the defenders could be held liable for the whole costs of carrying out any of individual works set out in the Schedule of Dilapidations the pursuers would need to establish that the provisions of Clause FOURTH required the defenders to carry out the works in question. [58] If, under reference to the Schedule of Dilapidations, what the pursuers are seeking to recover are the full costs of replacing individual component parts of the premises, the defenders will only be liable to meet those costs, if it can be established by the pursuers that there was no other reasonable way for the defenders to have complied with their obligations under the Lease, short of the replacement of the individual parts in question. If there were alternative and less onerous courses of action, by which the defenders could have complied with their obligations, then the defenders would have been entitled to have opted for them and the pursuers' claims against the defenders will fall to be restricted accordingly. [59] In my opinion, such an approach to the construction of Clause FOURTH is consistent with the assistance to be obtained as to the construction of such covenants in Lurcott v Wakely & Wheeler, per Fletcher Moulton L.J., at pp. 915 - 917, and per Buckley L.J at pp. 923 - 924, Proudfoot v Hart, per Lord Esher M.R, at pp. 50 - 54 and Lopez L.J., at pp. 55 - 56, McCall's Entertainments (Ayr) Limited v South Ayrshire Council (No.2), per Lord Hamilton at pp.1427A - 1428C, Crédit Suisse v Beegas Nominees Limited, per Lindsay J. at pp. 820j - 821c and Scottish Mutual Assurance plc v Jardine Public Relations. [60] Before passing from the authorities, it is important to note that the covenant to be found in Clause FOURTH is not couched in the same terms of the covenant before the Court in Taylor Woodrow Property Co. Ltd v Strathclyde Regional Council. In that case the tenants' covenant required them ".... at their own cost and expense to repair and keep in good and substantial condition and repair and maintained, decorated, paved, and cleansed in every respect all to the satisfaction of the landlords .... and to replace, renew or rebuild whenever necessary the premises and all additions thereto ....". In my opinion, it is clear that the terms of the covenant in that case were of a different and apparently more onerous nature than those found in Clause FOURTH. In particular, the obligation on the tenants to keep the premises in good and substantial condition and repair required to be carried out "to the satisfaction of the landlords". Likewise in Lowe v Quayle Munro Ltd, where the tenants had agreed "....to replace and renew or rebuild wherever necessary the leased subjects and all additions thereto... all to the satisfaction of the landlords and that regardless of the age and state of the buildings ....", the covenant which the tenants had agreed to was more onerous than in the present case. [61] It follows from the views I have expressed in answering this Question that, in my opinion, the extent of the obligations on the defenders in terms of Clause FOURTH does not fall to be determined by looking solely at what a reasonably-minded owner would have done or by looking solely at the condition that a reasonably-minded tenant would have required. In my opinion, it is important to have regard to all of the factors I have mentioned in answering this Question, before determining whether as a matter of fact the defenders have fulfilled their obligations under Clause FOURTH.The Pursuers' additional questions
Question 1.1 In construing the expression "the like good tenantable condition and repair" is it appropriate to take account of (1) the obligations of renewal and restoration in Clause FOURTH; and (2) the obligations to surrender up the premises in good and substantial repair and to restore the premises in the condition they were in at the commencement of the lease in Clause NINETEENTH?
[62] Both parties were agreed that this Question should be answered "Yes".Question 1.2 If so, do the qualifications to "repair" in Clause NINETEENTH, viz, "good" and "substantial" inform a construction of "the like good tenantable condition and repair" more onerous on the defenders than repair simpliciter?
[63] In my opinion, the use of the words "good" and "substantial" in Clause NINETEENTH adds nothing to the obligation that rested on the defenders under Clause FOURTH. The latter obligation on the defenders was not merely to repair the premises, but to keep the premises in "good tenantable condition and repair". That is admitted by the defenders. On that analysis, further detailed comparison with the term "repair simpliciter" would not be a useful exercise.Question 1.3 Equally, does the reference to the condition at the commencement of the lease inform a construction of "the like good tenantable condition and repair" more onerous on the defenders than repair simpliciter?
[64] The parties are in agreement that the premises were in "good tenantable condition and repair" at the commencement of the Lease. As it is accepted by the defenders that the obligations on them were not limited to repairing the premises, but also involved carrying out works necessary to keep the premises in "good tenantable condition and repair", more detailed comparison, in the abstract, with the term "repair simpliciter" would not be a useful exercise. That is particular so, in view of the fact that, during their submissions, counsel for the pursuers stressed that they were not suggesting that the premises required to be maintained in, or to be restored to, an "as new" condition.Question 1.4 Does the expression "good tenantable condition" inform a construction of "the like good tenantable condition and repair" more onerous on the defender than repair simpliciter?
[65] The parties are agreed that this question should be answered "Yes", but doing so begs the question as to the correct construction of the term "good tenantable condition and repair".Question 1.5 Does the expression "like" in Clause FOURTH, having regard to the provisions of Clause NINETEENTH identify a comparative standard against which the state of premises must be tested at its termination?
[66] The parties are agreed that this question should be answered "Yes", but doing so once again begs the question as to the correct construction of "good tenantable condition and repair".Question 1.6 Does the expression "like" require the premises to be in the same general state as they were at the date of entry?
[67] In my opinion, this question is affected by a measure of ambiguity. It could be construed as referring only to the physical condition of the premises. On that approach, the parties appear to be agreed that the defenders were not under any obligation to keep the premises and restore them at the end of the Lease in the same physical condition as they had been at the outset of the Lease (or an "as new" condition). On an alternative construction of the question, namely that it is directed at assessing the premises against the measure of "good tenantable condition and repair", the parties are agreed that measure applied throughout the Lease. Once again, however, that begs the question as to the correct construction of the term "good tenantable condition and repair".Question 1.7 Does that include a consideration of the commercial life of the component parts of the premises?
[68] The parties are agreed that this question should be answered "Yes", but in indicating their agreement to such an answer, the defenders submit that they were only obliged to renew and replace parts of the premises, when they had no useable commercial life left. They submit that they were under no obligation, at the termination of the Lease, to restore each component part of the premises, regardless of its condition at termination, to such a condition that its commercial life expectancy was exactly the same as it was at the commencement of the Lease. Those submissions were supported by reference to McCall's Entertainment v South Ayrshire Council (No.2) 1988 S.L.T. 1421, at pp.1427I to 1428A, and to Helen M Lowe v Quayle Munro Ltd 1997 S.C. 346, at p.349F - I. Subject to the views that I have already expressed in the Opinion, I agree. As I have already made clear, I have not heard any evidence about parts of the premises, such as the boiler system, the lifts, the windows, the roof, light fitments and an access roof, all of which were referred to in argument. Depending on the factual situation at the date of termination, it may well be that one or more of these items remained useable, but was not in such a condition that the premises met the required standard of being in "the like good tenantable condition and repair". On the other hand, the mere fact that the boiler system or one of the lifts did not have in 2002 exactly the same life spans as they had at the commencement of the lease in 1977, would not, in my opinion, automatically mean that the defenders had failed to keep the premises in "the like good tenantable condition and repair".Question 1.8 Does the condition of the premises at the commencement of the lease assist in understanding the proper construction to be placed on the terms of the lease?
1.8.1 Particularly, do the facts that the premises
(1) were new,
(2) had been previously unoccupied, and
(3) were, including the component parts thereof, (inherent in them being new and unused) at the start of the commercial lives,
inform a construction of "the like good tenantable condition and
repair" which is more onerous than repair simpliciter?
Question 1.9 Does the nature of the lease, including its object or purpose, at the time it was entered into assist in understanding the proper construction to be placed on the terms of the lease?
1.9.1 Particularly, do the facts that
(1) the lease constituted an investment vehicle for the landlords
in the form of, inter alia, the generation of rental income,
(2) in a marketplace where there was a demand for open plan
office space in excess of supply,
(3) the lease constituted a negotiated settlement between the
parties thereto as regards their respective rights and obligations,
(4) the obligations to renew and restore were unusual in leases
of such type, and
(5) the component parts of a building such as the premises
have a finite commercial life in commercial letting terms,
inform a construction of "the like good tenantable condition and repair" which is more onerous than repair simpliciter?
Defenders' additional questions
Question 2(a) In the context of the lease read as a whole, what is the significance of the word "like" where it appears in the phrase "the like good tenantable condition and repair" in Clause (FOURTH)? Does the condition of the premises at the commencement of the lease assist in understanding the proper construction of these terms of the lease?
[71] As I have already observed, the parties are in agreement that the premises were in "good and tenantable condition and repair" at the commencement of the Lease. One of the obligations that Clause FOURTH placed on the defenders was to keep the premises "in the like good tenantable condition and repair". Whatever else that phrase means it does not mean "'in a new condition". To that extent, the fact that the premises were in new condition at the outset of the Lease is irrelevant to identifying the proper construction of "the like good and tenantable condition and repair". Furthermore, the drafting of Clause FOURTH proceeds on the assumption that 25 years after the commencement of the Lease the premises could be, and in fact will require to be, in "the like good and tenantable condition and repair". 25 years on from the commencement of the Lease, the premises could not be "new". Nor, as is conceded by the pursuers, did they require to be "as new". If the premises can be in "good and tenantable condition and repair" when they are neither "new" nor "as new"', the fact that the defenders' predecessor was the first tenant of the premises does not, in my opinion, assist in construing the terms of the Lease.Question 2(b) Read as a whole, does the lease require the Defenders at the termination of the lease to restore the premises to their condition at the date of entry?
[72] Both parties are agreed that this question should be answered "No". It would not be appropriate for me to add anything further.Question 2 (c) Or does it simply require the premises to be kept in "tenantable condition"?
[73] I do not consider that it would be appropriate for me to answer this question, which may proceed on an incomplete summary of the provisions of Clause FOURTH.Question 2(d) In construing Clauses (FOURTH) and (NINETEENTH), and reading the lease as a whole, what is the significance of the words "renew" and "restore" where they appear in Clause (FOURTH)?
[74] I agree with the defenders that the words "renew" and "repair" should be construed in the context of the provisions of the Lease as a whole and, in particular, in the context of Clause FOURTH. I agree that the words "repair, maintain, renew, restore, cleanse and keep" give content to the obligations, not only to keep the premises wind and watertight but also to maintain them in "good and tenantable condition and repair". Whether that would require the defenders to carry out works that would fall to be described as "extraordinary", as opposed to "ordinary", repairs would depend on the facts relating to the works in question.Question 3. If the answer to question 2(b) is in the affirmative, is the appropriate standard that which applied at the date of entry, or does that standard require to be modified in the light of improvements in building materials and techniques, and changes in building regulations which have taken place since the date of entry?
[75] As both parties are agreed that Question 2(b) should be answered in the negative, this question does not arise. It might be sensible, however, that I should record that during his submissions on behalf of the pursuers, the Dean of Faculty indicated that under the Lease the pursuers, as landlords, would be responsible for the cost of any avoidable or unavoidable betterment associated with any works that required to be carried out by the defenders, as tenant.Question 4. Does the reference in Clause (NINETEENTH) to "restoring the premises to the condition they were in at the commencement of the lease" apply in all circumstances, or does it apply only to the removal of "permitted additions, improvements or alterations" made to the premises during the currency of the lease?
[76] The parties are agreed that this question should be answered "The latter". In other words, this particular obligation only relates to the removal of "permitted additions, improvements or alterations" made to the premises during the currency of the Lease.Question 5. In assessing whether or not the building is in "good tenantable condition" or whether the premises have been kept in "good and substantial repair" it is necessary to take into account of, or to make any allowance for, the length of the Defenders' period of occupation and the age of the building at termination?
[77] This question is framed in very general terms. It begs the questions as to how the terms "good tenantable condition and repair" and "good and substantial repair" fall to be construed. On the basis of the authorities to which I have been referred, the nature of these obligations did not alter whilst the Lease ran its course. On the contrary, it was known at the outset of the Lease that these obligations would apply throughout the Lease and thus would be applied to premises that were of increasing age. In seeking to determine whether the defenders have complied with the obligations on them, it could not be left out of account that the premises were 25 years older at the expiry of the Lease than they had been when the Lease began. To that extent, the defenders are correct that the premises have aged and that some features of their condition may have been affected by the passage of time. The defenders are correct that the Lease did not place them under an obligation to reverse the natural ageing process of the lease. That is conceded on behalf of the pursuers. Beyond that it is a question of fact, whether the condition of any parts of the premises has led to the premises not being in "good tenantable condition and repair" at the expiry of the Lease.Question 6. To what extent is the phrase "good and substantial repair" different in meaning from "good tenantable repair"?
[78] The parties are agreed that there is no relevant difference between the phrase "good and substantial repair" and "good tenantable repair". Clause FOURTH places an obligation on the defenders "substantially to repair, maintain, renew, restore, cleanse and keep (the premises) in the like good tenantable condition and repair". If the defenders have fulfilled that obligation, then the premises will have been "in good and substantial repair and condition"' at the termination of the Lease.Question 7. To what extent is the court entitled to have regard to the factual background to the lease, given the parties' respective pleadings? In particular, to what extent is the court entitled to have regard to "the value and rental of the subjects, and the requirements of the tenant who leases premises of given accommodation and rental" (see paragraph 8 of the pursuers' Note of Argument)?
[79] This and the two following questions have been superseded by the fact that between the allowance of the present proof and the date when the proof began, the pursuers departed from their wish to lead evidence (i) about the factual background to the lease, (ii) that, at the commencement of the lease, the premises were new and had never been occupied, and (iii) about the market conditions at the commencement and/or termination of the lease. For that reason, apart from confirming that it is a matter of agreement between the parties that the premises were new, when the Lease began, and that I have sought to construe the Lease solely on the basis of its written terms, it would not be appropriate that I should answer either of these questions.Question 8. To what extent must the court take account of the fact that the premises were new at the commencement of the lease and had previously been unoccupied in construing Clauses (FOURTH) and (NINETEENTH), and in particular, the phrase "good and tenantable condition and repair"?
[80] See Answer to Question 7.Question 9. To what extent can the court take into account the market conditions pertaining either at the commencement or termination of the lease?
[81] See Answer to Question 7. [82] In due course, the action will require to be put out By Order, for a discussion as to further procedure. Such a hearing will be fixed, following discussion with the parties' solicitors.