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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Wheatley
Lord Reed
Lord Mackay of
Drumadoon
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[2008] CSIH 65
CA121/07
OPINION OF THE COURT
delivered by LORD REED
in causa
POSSFUND CUSTODIAL TRUSTEE
LIMITED
Pursuers and Respondents
against
KWIK-FIT PROPERTIES
LIMITED
Defenders and Reclaimers
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Pursuer and Respondents: McColl;
Tods Murray LLP
Defender and Reclaimers: Lake; Anderson Strathern LLP
5 December 2008
Introduction
[1] This case is concerned with the
construction of a commercial lease. The question is whether a right of
inspection conferred by the lease upon the landlords entitles them to carry out
investigations in order to ascertain whether soil pollution may have occurred.
[2] The pursuers
are the present landlords, and the defenders are the tenants, of commercial
premises in Edinburgh, in terms of a lease entered into in
1993 between the defenders and Nissan UK Ltd.
The premises were at one time a garage, and contain underground storage
tanks which were formerly used for the storage of fuel. That use however came to an end at or before
the grant of the lease. Since then, the
premises have been used by the defenders as a centre for the supply and fitting
of tyres, exhausts and similar products and the carrying out of MOT
testing. The lease is for a term of 25
years from 25 May 1993.
[3] In 2007 the
landlord's interest was acquired by the pursuers. Shortly after they had taken entry, their
solicitors wrote to the defenders:
"We
hereby give you notice on behalf of the Landlords of their intention to
exercise their rights under clause 3.11 of the Lease to enter upon the Property
generally to examine the state of repair and condition thereof and in
particular to have their professional advisors carry out environmental
investigations.
The
Landlords' representatives Delta Simons will require access to the property on
the 6/7 November 2007 to carry out initial checks and thereafter will be
attending the property from 13 to 16 November to carry out the investigations."
[4] The defenders
were subsequently provided with a method statement by Delta Simons, the
environmental consultants instructed on behalf of the pursuers. It stated that the purpose of the proposed
investigation was to assess the significance of any potential environmental
liability associated with any soil and ground water contamination which might
be present. The investigation would
involve several stages. It would be
necessary first to carry out a service avoidance exercise and ground
penetrating radar survey, in order to identify the exact location of the
underground storage tanks, other sub-surface structures and live services. This would take up to two days to
complete. Drilling works would then be
carried out. These would involve drilling
five shallow boreholes, to a depth of approximately 6 metres beneath the
surface, in order to collect groundwater samples from shallow perched
groundwater likely to be present within made ground or shallow deposits. Four of these boreholes would be drilled
around the underground storage tanks, in the eastern part of the forecourt of
the premises. The fifth of the shallow
boreholes would be drilled in the western part of the forecourt. There would in addition be a single deep
borehole to a depth of approximately 30 metres beneath the surface, in order to
collect groundwater samples from the major aquifer within the underlying
sandstone. The drilling works would take
up to four days to complete. Each
borehole would be installed as a 50 millimetre diameter land gas and
groundwater monitoring well finished with a traffic strength cover, flush with
the surface. Approximately fifteen soil
samples would be collected at various depths and submitted to a laboratory for
chemical analysis. Groundwater samples
would also be collected and analysed, and land gas concentrations would be
monitored. The monitoring would begin at
least two days after the completion of the drilling works. A skip would be provided to collect waste
arising from the drilling. A
representative of Delta Simons would be present for about four days to oversee
the drilling works, record observations and collect samples. Cones, barriers and signs would be used to
cordon off the areas of the works.
[5] Through their
solicitors, the defenders indicated that, although they had no objection to
inspections under clause 3.11 of the lease (quoted below), they were not
agreeable to the proposed environmental investigations. In view of the defenders' refusal, the
pursuers commenced the present proceedings, concluding for declarator that the
defenders are obliged to permit them to enter the premises
"in
order to view the state of repair and condition thereof and, in particular, to
drill five shallow boreholes and a single deep rotary borehole within the
Premises in order to inspect and examine the condition of the solum of the
Premises."
In their pleadings, the pursuers explain that, having
purchased the premises, they wish to ascertain their condition, and in
particular to ascertain whether there has been any contamination of the solum
from the underground tanks or from any other source; and they maintain that clause 3.11 of
the lease entitles them to carry out the proposed investigations.
[6] The case proceeded
to debate on the question whether works of the general character proposed were
in principle permitted by the lease, leaving for later resolution, if
necessary, issues relating to the details of the works and the extent to which
any disturbance of the defenders' operations might be minimised. The Lord Ordinary resolved the question
debated in favour of the pursuers.
The lease
[7] As we have mentioned, the lease of the
premises is for a period of 25 years from 25 May 1993.
The premises leased are defined by clause 1.2.5 as
"the
subjects described in Part I of the Schedule and each and every part thereof
together with the pertinents thereof ....".
Part I of the Schedule refers to the "area of ground"
described in a 1925 feu charter "together with the buildings and erections on
those subjects". In terms of
clause 2, the premises are let to the tenant "under reservation of the
exceptions and reservations referred to in the Schedule Part III". Those reservations include, in
paragraph 2, the landlord's right
"to
enter and remain upon the Premises with all necessary tools, appliances and
materials for the purposes of repairing, altering or rebuilding any adjoining
or contiguous premises belonging to the Landlord.... Provided always that the
Landlord shall ensure that the exercise of such rights... shall be carried out in
such a manner as to cause the least practicable disturbance to the Tenant ... and
the Landlord shall make good any damage caused to the Premises or to the
Tenant's, any permitted sub-tenant's and/or any permitted occupier's fixtures,
fittings, stock or equipment."
Paragraph 3 contains a similarly expressed reservation
of the Landlord's right to enter upon the Premises for the purpose of
inspecting, repairing etc sewers and other conduits serving neighbouring
premises, subject to a similar proviso and a similar obligation to make good.
[8] Clause 3
sets out the tenant's obligations. In
particular, clause 3.4 requires the tenant to keep specified plant and
equipment in good and substantial repair and condition. Clause 3.6 requires the tenant
"to
repair, maintain, renew, rebuild and reinstate whenever necessary and generally
in all respects put and keep in good and substantial condition the Premises and
every part thereof with all necessary maintenance, cleansing and rebuilding and
renewal works and amendments whatsoever....."
Clauses 3.7 and 3.8 require the tenant to decorate the
external and internal parts of the premises.
Clause 3.9 requires the tenant to clean the interior and exterior
of the premises. Clause 3.10
requires the tenant to keep the premises clean and tidy. Clause 3.11 requires the tenant
"To
permit the Landlord and its agents at all reasonable times with or without
workmen on giving forty eight hours' written notice (except in emergency) to
the Tenant to enter upon the Premises generally to inspect and examine the same
to view the state of repair and condition thereof and to take a schedule of the
Landlord's fixtures and of any wants of compliance by the Tenant with its obligations
hereunder."
Clause 3.12 requires the tenant
"to
make good all wants of compliance by the Tenant with its obligations hereunder
of which notice in writing is given to the Tenant by the Landlord...."
In the event of non-compliance with such a notice, the
landlord is entitled to enter upon the premises and to make good the
non-compliance at the cost of the tenant:
"Provided
always that the Landlord shall exercise the rights conferred on it by this
clause in a fair and reasonable manner in so far as possible causing the least
practicable disturbance to the Tenant and making good any damage caused to the
Premises or the Tenant's or any sub-tenant's or any other permitted occupier's
fixtures, fittings, stock or equipment."
Clause 3.16 requires the tenant not to use the premises
otherwise than for the sale and fitting of tyres, exhausts and other specified
car parts and accessories, and the carrying out of MOT tests. Clause 3.26.1 requires the tenant
"to
execute all works as are or may be under or in pursuance of any Act of
Parliament... already or hereafter to be passed be directed or required to be
done or executed upon or in respect of the Premises....whether by the owner
and/or the Landlord and/or the Tenant thereof and to comply with all the
requirements of any Act of Parliament already or hereafter to be passed and all
notices which may be served by the Public, Local or Statutory Authority...."
Clause 4 sets out the landlord's obligations. In terms of clause 4.1, in particular,
the landlord grants absolute warrandice.
The Environmental
Protection Act 1990
[9] Reference was made in the course of the
parties' submissions to the principal features of the controls over polluted
land established by Part IIA of the Environmental Protection Act 1990 as
amended. Part IIA (inserted by section
57 of the Environmental Act 1995) deals with the identification of
"contaminated land" (as defined by section 78A(2)), with the "remediation" of
contaminated land (see section 78E(4)), and with the "determination of the
appropriate person to bear responsibility for remediation" (see section
78F). In broad terms, responsibility
lies primarily with the original polluter;
but, in cases where the original polluter cannot be found,
responsibility is transferred to the owner or occupier for the time being (see
section 78F(2)-(5)). The Act allows a
remediation notice to be served on an "appropriate person" after which, subject
to a right of appeal against the notice, the person served has a statutory
obligation to comply with the notice and carry out the remediation works. Alternatively, the "enforcing authority"
(usually the local authority) can itself carry out the remediation works and
recover the cost from the appropriate person or persons (see section 78P). Each enforcing authority is required to
maintain a public register which contains details of contaminated land for
which that authority is responsible and of remediation notices (see section
78R).
[10] In the present
case, it is common ground that the premises have never been identified as
contaminated land within the meaning of the 1990 Act, and that, even if they
were to be so identified, it is uncertain whether any statutory responsibility
for remediation would attach to either the landlord or the tenant. No reference was made to any other
legislation relating to soil pollution.
The parties'
submissions
[11] It is necessary to note the limited basis
on which counsel presented their submissions.
Both counsel approached the question as one turning on the construction
of clause 3.11. Neither counsel
sought to refer to any factual background which might bear on that question of
construction: the court was invited to
construe clause 3.11 in the light of its own terms and the other
provisions of the lease. Counsel for the
pursuers also contended that, since the description of the premises contained
in the lease adopted the conveyancing description contained in a feu charter,
and the latter conveyed title a coelo
usque ad centrum, it followed that the leased premises included the ground
beneath the surface. That contention was
not challenged by counsel for the defenders, and we proceed on that basis.
Discussion
[12] A lease, like any other contract, must be
construed as a whole, and so as to give proper effect if possible to all of its
provisions. In the present case, it is
necessary in particular to achieve a fit, if possible, between the landlord's
right to inspect and examine, by virtue of clause 3.11, and the tenant's right
to be maintained in possession, reflected in clause 4.1.
[13] Since a lease
is essentially a grant of possession of the subjects of the lease for the
period of the lease, it is implicit, if not expressed, that the landlord is
precluded from any action which encroaches materially upon the tenant's possession
of those subjects during that period.
The landlord's obligation to maintain the tenant in exclusive possession
may however be qualified by the terms of the lease. In the lease with which the present case is
concerned, in particular, clause 3.12 entitles the landlord, in the event of
the tenant's failure to comply with a notice to repair, to enter the premises
to make good the non-compliance, subject however to an obligation to do so "in
a fair and reasonable manner insofar as possible causing the least practicable
disturbance to the Tenant and making good any damage caused". As we have explained, paragraph 2 of
Part III of the Schedule to the lease also entitles the landlord to enter the
premises for the purpose of repairing etc adjoining premises, again subject to
an obligation to do so "in such a manner as to cause the least practicable
disturbance to the Tenant", and again subject to an obligation to "make good
any damage caused". Paragraph 3 of Part
III of the Schedule similarly entitles the landlord to enter the premises for
the purpose of inspecting, repairing etc sewers and other conduits serving
neighbouring premises, again subject to an obligation to do so "in such a
manner as to cause the least practicable disturbance to the Tenant", and again
subject to an obligation to "make good any damage caused".
[14] There is a
striking difference between the wording of the provisions which we have just
discussed and that of clause 3.11.
Although clause 3.11 entitles the landlord to enter the premises "to
inspect and examine the same to view the state of repair and condition
thereof...", there is no express obligation to do so in such a way as to cause
the least practicable disturbance to the tenant; nor is there any obligation to make good any
damage caused. In a professionally
drafted lease, the omission of such obligations, when they are specified in
several other provisions, is unlikely to have been unintended. While not necessarily conclusive in itself,
it strongly suggests that it was not envisaged or intended that the exercise of
the landlord's right of inspection under clause 3.11 would cause any
material disturbance to the tenant, or would result in any material damage to
the premises.
[15] There are
other pointers to the same conclusion. The lease does not generally omit commas and
other punctuation marks. In that
context, the absence from clause 3.11 of a comma after "same", in the
phrase "to enter upon the Premises generally to inspect and examine the same to
view the state of repair and condition thereof..." tends to suggest that rather
than the landlord being entitled, first, to inspect and examine the premises,
and secondly, to view their state of repair and condition, what is meant is
that the landlord is entitled to inspect and examine the premises in order to
view their state of repair and condition.
It is unnecessary for the purposes of the present case to decide the
precise limits of the inspection and examination permitted by these words: whether, for example, the reference in clause 3.11
to "workmen" implies, as the Lord Ordinary considered, that the landlord is
entitled to uncover parts of the premises, for example by lifting
floorboards. The word "view" suggests
however that clause 3.11 is concerned with matters which are observable (as distinct,
for example, from matters which require the removal of cores and other samples
for laboratory analysis). This is consistent with the absence of any
requirement to minimise disturbance or to make good damage.
[16] More
generally, it appears to us that if it had been the intention of the parties to
the lease that the landlord should be entitled under clause 3.11 to interfere
with the tenant's possession of the
premises to the extent contended for by the pursuers (which, as we have explained,
would involve intrusive investigations lasting several days and the cordoning
off of parts of the forecourt of the premises), one would expect to find a much
clearer indication to that effect in the lease.
[17] As against
these considerations, it was contended on behalf of the pursuers that clause
3.11 was concerned with "wants of compliance by the Tenant with its obligations
hereunder", as its final words indicated; and the tenant's obligations under clauses 3.6
and 3.26.1 were capable of extending to the remediation of contaminated
land. It may be that, in the event that
the solum of the premises were to be identified as contaminated land for the
purposes of the 1990 Act as amended, and in the further event that a
remediation notice were to be served on the landlord or the tenant, then
(leaving aside the possibility of a successful appeal) the tenant would come
under an obligation in terms of clause 3.26.1.
None of these events has however occurred. More fundamentally, the meaning of clause
3.11 depends on the intention of the parties at the time (in 1993) when the
lease was entered into. That intention
has to be ascertained from the language which the parties used. For the reasons which we have explained, the
language used in clause 3.11, construed in the light of the other
provisions of the lease, is not apt to cover investigations of the kind
proposed. If, subsequent to the
commencement of the lease, legislation was enacted which fell within the scope
of clause 3.26.1, and the tenant's compliance with that legislation could only
be determined by carrying out investigations going beyond the scope of clause
3.11, that would not alter retrospectively the meaning of clause 3.11.
[18] Clause 3.6
imposes on the tenant an obligation
"to
repair, maintain, review, rebuild, and reinstate wherever necessary and
generally in all respects put and keep in good and substantial condition the
premises and every part thereof with all necessary maintenance, cleansing and
rebuilding and renewal works and amendments whatsoever."
In the light of clause 3.11 (which is as relevant to
determining the scope of clause 3.6 as vice
versa) and clause 3.16 (which restricts the use of the premises to uses
which would not be likely to be affected by soil pollution from fuel), as well
as the terms of clause 3.6 itself, it might be doubted whether that clause was
intended to apply to the contamination of the soil by fuel. The question was not however fully addressed
in counsel's submissions, and it is unnecessary for us to decide it for the
purposes of the present case. The
possible scope for argument as to the effect of clause 3.6 does not override our
clear conclusion as to the limited nature of the right conferred on the
landlord by clause 3.11.
Conclusion
[19] In these circumstances we shall recall the
interlocutor of the Lord Ordinary, sustain the defenders' plea to the relevancy
of the pursuers' averments and dismiss the action.
