Scottish Court of Session Decisions

 

OUTER HOUSE, COURT OF SESSION   [2008] CSOH NUMBER79
	OPINION OF LORD COULSFIELD   in the cause   POSSFUND CUSTODIAN TRUSTEE LIMITED   Pursuers;   against   KWIK-FIT PROPERTIES LIMITED   Defenders:     ­­­­­­­­­­­­­­­­­________________

 

 

INFOPursuers: MacColl; Tods Murray, LLP

Defenders: Lake; Anderson Strathern, LLP

 

29 May 2008

 

 

[1] The pursuers in this action are the present landlords and the defenders are the tenants of premises known as 7-13 Falcon Road West, Edinburgh in terms of a lease dated 29 July 1993 and 13 September 1993, entered into between the defenders and Nissan UK Limited. The pursuers obtained right to the landlords' interest under the lease by a disposition dated 22 August 2007 and registered on 26 October 2007. 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 and since the grant of the lease the defenders have used the premises as a centre for the sale, supply and fitting of tyres, exhausts and similar products and the carrying out of MOT testing. The period of the lease is 25 years from 25 May 1993.

[2] The present dispute arises because the pursuers wish to make investigations into the solum of the premises in order to ascertain whether there has been any contamination of it, either from the underground fuel tanks or from any other source. On 30 October 2007, agents for the pursuers notified the defenders that they intended to carry out an inspection and examination of the premises for these purposes. There followed correspondence between agents for the pursuers and agents for the defenders in the course of which the pursuers supplied to the defenders a method statement explaining the purpose of the investigation and the nature of the works proposed. The purpose was stated as follows:

"The purpose of undertaking investigation at the site is to assess the significance of any potential environmental liability associated with any soil and ground water contamination present below the site".

[3] The statement proceeded to explain that steps would be taken to identify the exact location of the storage tanks and of any services which would require to be avoided in carrying out the investigation works, and continued:

"Following the service avoidance exercise, it is anticipated that five shallow bore holes and a single deep rotary borehole (potentially to a depth beyond 30m) to investigate ground water within the Major Aquifer) will be advanced in specific areas as shown in the attached proposed exploratory hole location plan. It is considered likely that the works will take up to a total of 4 days to complete. On the basis of the current site layout and tenant operations, Delta-Simons (a consultant acting for the pursuers) considers that drilling within the building on on-site is not currently feasible.

Subsequent ground water monitoring will be undertaken at least 48 hours following completion of all the drilling works".

[4] The statement goes on to discuss the location of the exploratory holes and explains that the drilling of the five shallow boreholes to a depth of approximately 6 metres beneath the site's surface would be carried out to collect ground water samples from the shallow perched ground water likely to be present within laid made ground or shallow drift deposits, and to give further details of the likely location of these boreholes. It continues:

"Each shallow borehole will be installed as 50mm diameter land gas and ground water monitoring wells. Each well head will be completed with a traffic strength well cover finished flush with the site surface".

[5] The statement also gives further details of the one deep borehole, which, is to be terminated at least 2 metres below a definite ground water strike and will be installed as a land gas and ground water monitoring wells, similar to that installed in the shallow boreholes.

[6] The defenders refused permission for the works proposed: their position is, simply, that the pursuers have no entitlement to carry out intrusive works of the kind described in the statement above referred to. The pursuers then raised this action in which they conclude for declarator that the defenders are obliged to permit the pursuers to enter upon the subjects, together with workmen "to inspect and examine the whole premises (including the solum of the premises and the underground tanks situated therein) 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 the condition of the solum of the premises.". The argument before me was concerned with the question whether works of an intrusive nature are in principle permissible in terms of the lease, and there was no discussion of the precise nature and extent of the works which are proposed to be carried out or the degree of disturbance to the defenders' operations or the extent to which any such disturbance could be minimised. It is, of course, evident from the above description that the works proposed by the pursuers would be intrusive and involve quite significant operations on the premises but the issue debated before me was whether intrusive works of that general character were permitted by the terms of the lease. The defenders invited me to dismiss the action: the pursuers sought a proof before answer.

[7] The lease itself is in fairly standard form for a commercial lease. The tenant is, of course, bound to pay rent and is also bound, in terms of clause 3.6, to "well and substantially 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. Clauses 3.7 to 3.10 of the lease deal specifically with exterior and interior decoration, with cleaning and the treatment of surfaces and with maintenance of the premises in a tidy condition clear of all rubbish. The critical clause of the lease is clause 3.11 which requires the tenant :

"To permit the landlord and its agents at all reasonable times with or without workmen on giving 48 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 landlords' fixtures and of any wants of compliance by the tenant with its obligations hereunder".

[8] Clause 3.12 requires the tenant to make good all wants of compliance with its obligations of which notice in writing is given by the landlord within a defined period, and empowers the landlord to enter on the premises and carry out repairs if the tenant fails to comply with a repair notice, but subject to the proviso that the landlord must exercise the rights conferred by the clause in a fair and reasonable manner, causing the least practicable disturbance and making good any damage. The remainder of clause 3 deals with other restrictions and obligations upon the tenant, none of which is relevant to the issue in this case. Reference was also made in the debate to Part III of the schedule to the lease which sets out certain exceptions and reservations in favour of the landlord including, in paragraph 2, a right to enter on the premises, on notice, for the purpose of carrying out repairs to adjoining premises belonging to the landlord, but subject to the requirement that the least practicable disturbance should be caused and damage should be made good.

[9] There was no dispute between the parties as to the general legal principles applicable. Reference was made to Rankine on Leases (3^rd edition) at page 213 where the author states:

"The general rule is that, possession once taken, the landlord shall do nothing, and, so far as in him lies, allow nothing to be done to oust the tenant from the subject let or any material part of it during the lease. And the leading, though not the only, remedy is action on the warrandice expressed or implied in the lease".

[10] Reference was also made to page 217 where the author states:

"Eviction may be either partial or total.

The remedy in the case of partial eviction is an action of damages, which usually takes the form of a demand for reduction of rent, when the eviction is of a permanent kind. But in circumstances which involve practically a suspension or dissolution of relation of landlord and tenant, there is the more thorough thorough-going remedy of throwing up or reducing the lease".

[11] Reference was also made to Paton & Cameron on Landlord and Tenant and to Chevron Petroleum (UK) Ltd v The Post Office 1986 S.C.291 where it is pointed out that the landlord's obligation is not to do anything active to disturb the tenant's possession.

[12] The submission for the defenders was that the works proposed by the landlords would involve taking possession of an area or areas of the site for a distinct period and would amount to eviction of the tenant for that period, and thus involve a breach of the landlords' substantial obligation. It was further submitted that clause 3.11 of the lease did not entitle the landlord to carry out works of this scalekind. The clause permitted the landlord to "enter on" but not to remain on the premises, and to carry out a general inspection, rather than to inspect the condition of the premises generally. What was envisaged by clause 3.11 was an inspection of the premises which would enable the landlord or his representatives to view the state of repair and condition and to take for example, a schedule of the landlords' fixtures, which are specifically referred to in the following clause. The words "inspect and examine" in the clause must have a meaning distinct from the words "view the state of repair" but in any event these words could not be taken to entitle the landlord to do more than to examine the premises and see what could be seen rather than to carry out intrusive works. The reference to "workmen" in the clause could merely mean that the landlord would be entitled to have such a person to view the state of walls or roof. If it had been intended that the landlord should be entitled to carry out intrusive work then some clause in regard to the reasonableness of the work and payment for damage caused to the tenant, on the lines of the provisions in clause 3.12 and paragraph 2 of part III of the schedule, would certainly have been included in the lease.

[13] For the pursuers it was submitted that the pursuers' object was to ascertain the state of the ground conditions in the premises, which was within what was permitted by clause 3.11. In giving notice the pursuers had made clear what their objective was and they accepted, and had endeavoured to make it clear in correspondence, that the works would require to be carried out in the least burdensome possible manner for the tenant. It was pointed out that the premises as defined in clause 1.2.5 of the lease, include, the whole solum of the area let and it was submitted that the fact that workmen were referred to in clause 3.11 indicated that the defenders' construction that only a superficial visual examination or something similar was permitted could not be sustained.

[14] In my opinion,The arguments advanced in this debate raises a very sharp and limited issue . The question simply is whether the power to inspect and examine implies a power to carry out intrusive work for the purposes of an inspection or examination. In my view, the reference to "workmen" demonstrates, quite clearly, that the landlord is entitled to carry out work. The obvious purposes for which work might be carried out include the opening up of suspect areas of walls or floors, for example, in order to ascertain the state or condition of the premises. Such opening up and inspection does, in my opinion, fall within the words "view the state and condition thereof". I do not think that there is any implication that the inspection is to be limited to a superficial visual inspection. It would not, in my view, be sensible to limit the power of inspection in that way, particularly in a long lease, when the condition of the premises may materially alter over time, and it may well be in the interests of both parties that the condition should be properly ascertained. It may be correct that when the lease was entered into, the parties would primarily have had in mind the carrying out of ordinary repairs which would fall upon the tenant in terms of the lease. If specific attention had been directed to works of a more intrusive character, it may well be that the parties would have considered adding specific provisions similar to those in clause 3.12 and paragraph 2 of part III of the schedule, but I do not think that the omission of such provisions can be held to limit the application of clause 3.11 in the way suggested by the defenders. In any event, if, as appears to be the case, the landlords are apprehensive that there may be an environmental problem, it seems to me that it is in the interests of both parties that investigations should be made in order to ascertain the extent of the problem, provided that can be done with reasonable regard for the conduct of the tenant's business. In my view, therefore, the defenders' submission should be rejected. The consequence is, as parties agreed, that the order to be made should be an order for a proof before answer.

[15] That is sufficient to dispose of the narrow issues argued in the debate. There may well be a question whether there is some limitation on the extent of the intrusive investigation which the landlord can carry out, under clause 3.11, but no arguments were directed to that question. It is, however, perhaps worth adding that both parties, as I understood the position, accept that the decision of the this narrow issue in this debate has no bearing on any issue question that might arise between landlord and tenant as to the consequences of any environmental damage which may have been sustained in the premises or in regard to any liabilities which might arise therefrom.